Chapter IV - Commonwealth

Part 1

Meeting of Commonwealth Prime Ministers, London, March 8-17, 1961

Memorandum from Special Assistant to Secretary of State for External Affairs to Under-Secretary of State for External Affairs

SECRET [Ottawa], January 9, 1961

South Africa and the Commonwealth

Before he left on holiday I had an opportunity to question the Prime Minister about this subject. I believe that the following paragraphs reflect his current thinking.

The Prime Minister said that in recent weeks he had been giving a great deal of thought to how this item should be dealt with at the Prime Ministers’ meeting in March. Although one could not tell how matters would develop, his present view was that the time for “abrupt action” had not arrived. Strong arguments could be made both for and against the exclusion of South Africa, but for purposes of the March meeting he thought that the best course would be to give notice again to South Africa that its status as a member of the Commonwealth was in jeopardy. I could not determine whether the Prime Minister meant that the Meeting should defer giving its consent to South Africa’s remaining, as a republic, within the Commonwealth, or whether he is expecting that such consent will be given with some accompanying or parallel notice of probation relating to South African race policy. I think he meant the former of these alternatives, and will take the next opportunity to follow up the point. In any case he talked of placing the onus on South Africa to make concessions or get out. He said he had in mind that the postponement of “abrupt action” by putting the Union Government, as it were, on probation, would have an indirect but useful effect on the next election, i.e., presumably, it would assist the United Party which could contend that unless concessions were made on racial policy, South Africa’s Commonwealth membership would be endangered. In explaining this, the Prime Minister said that all his emotional reactions, except in the field of racial policy, were favourable to South Africa, e.g., the South African record in wartime and South Africa’s historical connection with the Commonwealth.

It was clear from the Prime Minister’s remarks that, despite his strong feelings on racial discrimination, he would be most reluctant to be responsible for South Africa’s expulsion from the Commonwealth at least until a further opportunity had been given for changes to evolve in South Africa’s racial policies. He implied, however, that if after this further postponement there was still no improvement so far as race policy was concerned, South Africa would have to expect to pay the price in terms of Commonwealth membership.

The Prime Minister acknowledged that some of his previous statements about South African racial policy, taken together with the passing of the Bill of Rights, might have led people here and abroad to expect Canada to advocate or support a move to exclude South Africa from the Commonwealth. He thought there would be some comment along these lines but did not appear to believe that it would be particularly difficult to deal with. In this context he said that he was still playing with the idea of having a resolution introduced in the House of Commons for the purpose of testing Parliamentary opinion and in particular finding how far the Opposition parties were prepared to go. This is the second time that the Prime Minister has mentioned the possibility of a resolution. He said that he had not yet come to any decision on this point. Indeed in all his comments he made it clear that his thinking was tentative and that his tactics would be subject to alteration in the light of developments.Footnote 1

H.B. ROBINSON

460. J.G.D./XII/C/110.1

Memorandum from Secretary of State for External Affairs to Prime Minister

CONFIDENTIAL [Ottawa]. January 16, 1961

South Africa and the Commonwealth

In a paper on this subject dated December 30Footnote 2 an attempt was made to examine in outline the main aspects of this question, what was known of the present thinking of other Commonwealth governments, and the possible courses that might be followed. The conclusion was reached that the issue had narrowed to whether South Africa should or should not remain as a member, and it was noted that a fuller study of the implications of this dilemma would be made.Character of the Commonwealth

There are two central themes which are not easily reconciled:

The Commonwealth has flourished on diversity and on mutual tolerance. Wide variations in local conditions and points of view have been reflected in differing domestic and foreign policies. The various members, while at times feeling free to criticise each other publicly, have had recourse to the United Nations for the negotiation of intra Commonwealth disputes (such as that over Kashmir) rather than to meetings of Commonwealth Prime Ministers.

By its very diversity the Commonwealth constitutes a meeting of races and cultures. The phrase “multi-racial Commonwealth” has a firm foundation of racial equality insofar as it is recognized that the African or Asian countries have the same status as the white states within the Commonwealth. By implication it may be thought, or hoped, that “multi-racial” should be construed to mean “racial equality” within each state or that the citizens of one Member should be equal to those of any other; and therefore, that all Commonwealth citizens were interchangeable.Recognized Commonwealth Principles?

The question of agreed Commonwealth rules of action has, under present conditions, inevitably been raised in regard to race relations. Suggestions, of which the most recent was made by a Labour member in the British House of Commons, have been made that there should be a code to cover the whole field of human rights. A minimum common understanding derives from traditions passed on from the United Kingdom to its colonial territories. There is, however, a wide variation in the degree of acceptance. A set of common rules would, in the main, fall under the following headings:

Form of Government: The British form and practice of democracy have been adopted in full measure in Canada, Australia and New Zealand and, with some limitations, in South Africa, India and Malaya. In Ceylon the British system has been stumblingly and incompletely followed. In Pakistan no political democracy in our sense exists at the present time. In Ghana part of the form and little of the spirit survive. Nigeria has not had time to show its method of adaptation. In sum, it could not be said that democracy, as we understand it, is generally practised or acknowledged throughout the Commonwealth. An equally safe conclusion is that no practical steps to secure uniformity could be taken. At the same time, it is evident that there must be limits to the tolerance of types of government. If, for example, a Commonwealth government became fully Fascist or Communist, the country might be considered to have become unacceptable as a member.

Civil Liberties: Here again there are wide and apparently unchangeable divergences in theory and in practice. The basic freedoms of speech and association are variously interpreted as, say, between Canada and Australia on the one hand, and any of the new Commonwealth members on the other. Freedom of the press has narrow boundaries in Ghana where criticism of the Government may conveniently be classified as sedition.

Law: To a considerable degree the British conception of law has taken root in all Commonwealth countries and the independence of the courts has been vigorously upheld in South Africa. On the other hand, the role of the court as protector of the citizen against arbitrary acts of government has been curtailed in a number of Commonwealth countries as, for example, in India where citizens may be held in jail for political offences under the annual Preventive Detention Acts without recourse to the writ of habeas corpus.

Foreign Policy: Not since the early 1920’s has there been support for a common foreign policy or even identical policies; but there appears to be a tacit understanding that certain principles are held in common. One is the acceptance of responsibility to work toward “freedom from want” as expressed in the Colombo and other Commonwealth aid plans, and another is the pursuit of international peace combined with a self-denying ordinance against military aggression.

Free Movement of Peoples: Over more than half a century there have been suggestions that there should be extended or complete freedom of movement between one part of the Commonwealth and another. The argument that migration should not be limited by racial discrimination has been prominent and is currently illustrated by criticisms in the West Indies of Canadian immigration policy. Of the old Commonwealth members the United Kingdom alone has opened its doors to Commonwealth citizens regardless of race. The results of this policy are conspicuous, with non-white areas in all the large cities and with the market for unskilled labour flooded, and largely supplied, by non-white persons. It is questionable whether it would be in the interests of Australia, New Zealand or Canada to follow the United Kingdom example.South African Membership of the Commonwealth

These general considerations bear on the decision of the future relationship of South Africa to the Commonwealth. Undoubtedly there exists in every Commonwealth country other than South Africa a vocal and vigorous public opinion to the general effect that the latter’s racial policies are morally wrong and inconsistent with the ideals common to other members. The action demanded ranges from condemnation through economic boycotts to exclusion from the Commonwealth. Condemnation, while understandable, would probably have no influence on South Africa; economic boycotts would effect no useful purpose.

It would be inconsistent with Commonwealth precedents to terminate South African membership on the ground that South Africa was to change from monarchical to republican status. Not only is the form of government (within limits suggested above) clearly a domestic responsibility, but there are already republican members. On the other hand, the South African claims that racial policies are the concern only of the country pursuing them can hardly be accepted.Arguments for and against Exclusion

FOR:

It would be consistent with the general Commonwealth disagreement with South Africa’s racial policies;

It would remove a discordant element and perhaps make the Commonwealth more permanently acceptable to the Asian and African members, many of whose leaders feel a direct emotional involvement because they believe that the dignity of all coloured races is involved in apartheid;

It would give to the Commonwealth a cleaner bill of health on racial relations – an important factor in its influence on outside countries.AGAINST:

An objection already voiced by a number of Commonwealth governments is that it would be desertion of the people of South Africa (other than the Nationalists);

It is at present only a speculation as to how far Asian and African members would be strengthened in their Commonwealth affiliation;

The economic and strategic relations would be somewhat, but perhaps not seriously, affected;

The most far-reaching objection is the precedent created by exclusion of a member because of its national policies. This is not so much a quasi-constitutional argument based on the convention against interference in domestic questions – and it has already been suggested that racial policies cannot be exclusively domestic – as an approach to a different kind of Commonwealth.The Future of the Commonwealth

To develop further this last argument against the exclusion of a member leads to a dilemma which has already been indicated. On the one hand it has been said with some justice that a Commonwealth made up of a variety of races, and including countries passionately opposed to the domination of non-white by white peoples, cannot afford to include a member intransigently committed to the contrary view. As against this strong argument is the difficulty of drawing the line in the enforcement of political and social principles and practices. Should, then, the protection of human rights be more widely pressed? Should the Tamil minority of Ceylon be protected against the Sinhalese majority; the opposition in Ghana be given the normal rights under the British concept of law; the Pakistanis be required to restore representative government; Australia be obligated to cancel its “white Australian” policy; or Canada to admit immigrants from India and the West Indies as freely as those from the United Kingdom? Or, to put the same problem in another way, can the Commonwealth enjoy the advantages of diversity without its disadvantages? This argument should not be pressed too far, for it can be held that racial discrimination, practised as a national policy, differs in degree and perhaps in kind from other departures from human rights. Thus to attempt to solve the racial problem by including it in a code of ethics would not only raise many complications but also be, in that sense, a false approach.To Return to South Africa

It is suggested that South Africa be allowed to remain as a member for the present at least. It may be helpful to examine possible procedures on the assumption that the Canadian Government does not wish at least to initiate a move leading to exclusion. Two possible approaches were mentioned in the memorandum dated December 30: that there should be a declaration by the nine members, or alternatively a more generalized one by all ten. The second could perhaps be regarded as not going far enough, while the first involves contradictions. To these may be added a further possible course, based, like the other two, on the assumption that the Commonwealth cannot afford to abdicate its responsibility for racial relations.

At the forthcoming meeting of Prime Ministers the South African Prime Minister could be told that there was no objection to a member state being a republic. This move would eliminate fruitless controversy over domestic jurisdiction and Commonwealth precedents. To this, however, would be added a warning that, because the question of continued membership had arisen, it was the duty of other Prime Ministers to point out that there were serious differences on the principles of race policies; that racial relations could not be regarded as wholly domestic; and that, while the peculiar problems of South Africa were recognized, it was hoped that South Africa would find it possible to adjust, as rapidly as practicable, its views to those of other Commonwealth members. This would not be a proposal for a probationary status with the acceptance of a republican state as a sanction, but a warning that in this vital field, there must be more agreement on a subject of pressing and general concern.

It would be impossible for the communiqué to be silent on the one Commonwealth subject which has commanded wide public interest, and it should, therefore, contain the gist of the points made in paragraph 9. It is recognized that to include a record of differences would be a new departure, but surely a departure less radical than the exclusion of a member.Results of such a Course

The possibility cannot be excluded that South Africa would feel so strongly about a procedure such as that described above that it would voluntarily withdraw from the Commonwealth. This is, perhaps, a justifiable risk.

It is more difficult to determine the extent to which a statement such as has been suggested would satisfy either other Commonwealth governments or – if acceptable to them – public opinion. It would be neither a clarion call for the ending of racial discrimination nor a heated denunciation of South Africa. It would, however, meet the primary requirement for a firm stand on race relations.

As to the views of the other Commonwealth governments we have limited information, and it is quite probable that none has reached a final position. On the other hand the United Kingdom is obviously hoping that the issue can be avoided by treating it as wholly covered by the republican question and accepting that as under domestic jurisdiction (in spite of the 1960 communiqué); while, on the other hand, most of the other governments regard the racial question as one too important to be ignored.

There seems to be a need, therefore, for an initiative which would record the general Commonwealth position on racial relations without splitting the members into white and non-white camps. It has been the suggestion in this paper that the solution lies – at least for the present – neither in the expulsion of South Africa nor in the creation of a comprehensive set of principles. If this is correct, there remain these possible courses of action:

An agreed paragraph in the communiqué, calling for the end of racial discrimination everywhere as quickly as practicable;

A nine-power public statement disclaiming any sympathy for South African racial policies.

The second of these seems to have few advantages. The first would have meaning if it were unanimous, but it might be impossible to find a wording acceptable to South Africa on the one hand and to, e.g., Ghana and Malaya on the other. We come back, then, to the procedure outlined in paragraph 9 above.

The general approach that might be taken in the Prime Ministers’ Meeting has been indicated. It would deplore the present unwillingness of South Africa to move toward a moderation of its racial policies; emphasize the strength of opposition in the Commonwealth to racial discrimination; deprecate a radical solution such as the exclusion of South Africa in a Commonwealth accustomed to mutual tolerance and understanding; but make it clear that tolerance alone cannot be stretched indefinitely to bridge a wide gap in fundamental principles.

Presumably some of the Prime Ministers would wish also to describe at greater length to parliament and public their views on human rights, and explain the reasons for the course taken in London as contrasted with the alternatives of acceptance of South African membership without comment or non-acceptance. Some of the following points might find a place in such a Canadian statement:

The importance attached by the Government to human rights and in particular to racial equality;

Realization that the racial problem in South Africa is complex and can be solved only by a series of steps;

The attempt by other members of the Commonwealth to encourage a gradual approach to better racial relations in South Africa, rather than to take the easy path of accepting defeat now by taking an extreme course;

To expel South Africa now would be of no advantage to the non-whites, whose attitude toward Commonwealth membership has not been in any case clearly defined;

An indication that the language of the communiqué should leave no doubt as to the significance of the discussion, or be interpreted as a means of shelving the issue.

Should the approach suggested in this paper commend itself to you as worthy of further study, you might wish to have prepared fuller notes of possible statements in the Conference and in Parliament.

H.C. G[REEN]

461. DEA/50085-J-40

Memorandum from Secretary to Cabinet to Assistant Under-Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], January 20, 1961

South Africa and the Commonwealth

I have read with admiration your excellent memorandum of January 16th on this subject which Mr. Green has sent to the Prime Minister and my first impression is that I can agree with almost all you say except the conclusion. I hope we will have a chance to discuss it. This is going to be such an important issue on which the Prime Minister feels so deeply and is so perplexed that I think he should cogitate on this well argued case.My reason for disagreement in the conclusion is not based on my belief that the South Africans are morally wrong, nor that we should, by excluding them, help the coloured people in South Africa. I believe the South African situation is a tragedy to which I can see no tolerable solution. I wouldn’t preach to them; were I in their position preaching would infuriate me.My different conclusion arises rather from my views about the nature of the Commonwealth and its role in international affairs this next decade. I regard the Commonwealth as a kind of club at which and through which we can get some improvement in understanding among the governments of its diverse members, and which serves as an affectionate and comforting symbol for a lot of people, particularly upper and middle class people in these countries. This club can do a little to bridge the gulf between the white and coloured – a gulf which I think will get wider and more visible in the next five or ten years. We need to preserve all the bridges we can across it.If we take the positive action that is needed now to re-affirm South Africa’s membership in the Commonwealth, that action will be interpreted widely as implying some approval or at least toleration of South Africa’s policies, whatever may be said. On the other hand, if the Prime Ministers decline to take such action to re-affirm, then people both in the Commonwealth countries and outside will realize with a start that the Commonwealth does mean seriously what it says from time to time in woolly phrases. After a refusal to re-affirm I think the value of the Commonwealth as a bridge between the white and coloured will be strengthened (despite the way that the United Kingdom and some other whites will feel – the U.K. is stuck with having to enthuse about the Commonwealth in any event).On the other hand, after a re-affirmation in March, I think a number of the governments and many people in the Commonwealth will merely pay lip-service to it, treating it as of less and less importance, embracing widely divergent views on questions of principle and devoting its efforts to papering-over its differences rather than seeking a true understanding of one another’s views on international problems.My own view is that at the meeting in March Canada should take the lead on this matter and after listening to the U.K. and South Africa should express its view contrary to re-affirmation basing it upon the effect on the nature and reputation of the Commonwealth. In doing so Canada should make no direct criticism of South Africa’s internal affairs but point out that by accident South Africa has put us in a position where positive action is required which we are not prepared to support because of the nature of the policies they have felt it necessary to follow and the effects of these deliberate policies on the opinion of people in many parts of the world including Canada. In these circumstances it is almost certain that the majority would be with us on the issue, and South Africa would presumably leave the conference at once and blame us for rejecting them.I recognize, of course, that other members of the Commonwealth depart from the principles of British democracy, justice, and non-discrimination, in one way or another, notably Ghana and Pakistan. What they do however has not shocked the world the way South Africa’s action has, (nor should it in my view) and it is the world’s opinion of South Africa which is the reality with which we have to contend.

R.B. B[RYCE]

462. DEA/50085-J-40

High Commissioner in United Kingdom to Prime Minister

SECRET. CANADIAN EYES ONLY. London, January 31, 1961

My dear John [Diefenbaker]:Naturally, you will only have been given a condensed digest of the extensive reports contained in the various telegrams which we have been sending back in regard to the plans for the Prime Ministers’ Conference. I am sure, however, that you will have been impressed by the efforts which are being made at various levels from the Minister down to emphasize that all Commonwealth countries but Canada are ready to deal with the question of South Africa’s continued membership.The formula which has been adopted by Sandys and, in turn, by his officials when speaking to officials from Canada House is that the other Prime Ministers will not take the initiative in raising any question either about the propriety of dealing with South Africa’s membership at this time, or with the right of South Africa to continue as a member if that should come up for consideration. For this reason, it does seem that the utmost care should be given to the position which Canada will take and, when that is definitely decided, I would be most grateful if I could be informed on a strictly personal basis as soon as it is conveniently possible. I shall not discuss this with any of the other officers until it has reached the point when a general directive is being prepared, but it will help me in the discussions I am bound to have between now and the first week in March.It is clear that Malaya, India, Ghana and Nigeria would probably welcome a firm stand by Canada against the discussion of this subject in March, if any reasonable ground can be found for taking that stand. It seems, however, that Verwoerd is anticipating that difficulty because he has stepped up his programme and, although he at first announced that this subject would not be dealt with until May, he brought the Bill to make South Africa a republic forward for Second Reading yesterday. It would seem likely that they will have taken the necessary steps to make South Africa a republic before the meeting in March.We then come to the question as to whether a firm stand is to be taken against South Africa’s continued membership if no satisfactory device can be found for postponing consideration of this subject. I know how strongly you hold your views on the apartheid policies of the South African Government, particularly as extended and narrowed in recent statements by their Prime Minister, but the question does arise as to whether there is not some possibility that Graaf might form a government. I believe that he assured you, as he did me, that if he formed a government he would end the present apartheid policies, recognizing however that this must be a long-term programme of education and preparation. I gathered that he had in mind something similar to what they are doing in Pakistan, where an effort is being made to create a civic consciousness through a system of free voting in the municipalities. There is also the plight of the Anglo-Saxon settlers, as well as those from India and Malaya, to be considered. It is not clear what the attitude of the present government might be if action were taken which they would regard as punitive. I am inclined to think they might react somewhat vigorously.It seems to me that to some extent the present situation is complicated by the announced intention of Ghana, Guinea and Mali to form a union. The attitude of the United Kingdom Government at present is that there is little evidence yet of any clear thinking on this subject by Nkrumah or Sekou Touré, and they are still inclined to think that this flight of imagination may get no farther off the ground than the original announcement of a union between Ghana and Guinea. However, it would seem that the discussions will be carried on in a somewhat unrealistic atmosphere if this subject is not mentioned. If it is, then I should think that judging by earlier performances Nkrumah is likely to assert his intention of going ahead with this plan, probably to an extent which goes far beyond anything for which he is yet ready. What then will be the attitude of the other members of the Commonwealth?If this situation should arise, it would seem that there would be every possibility that the Conference would be called upon to deal not merely with the question of one continuing membership, but possibly two.I am only venturing a guess, but I should think that if this subject should come up South Africa would find this a convenient diversion and seek to create the impression that it would be unreasonable to deal with the South African situation on one ground and not deal with the situation raised by Ghana on the other. It is true that the issues are of a different nature, but certainly they are issues which relate to the possibility of continuing membership in the Commonwealth.It is clear that the pattern which the United Kingdom Government would like to have adopted is to take the position that the South African situation is a domestic problem and that, from their point of view, the rights of the white settlers from Britain, as well as the coloured and blacks themselves, are more likely to be advanced by keeping South Africa in the Commonwealth and not inviting still sterner measures. Along with this, they apparently hope to avoid discussion about the Ghana situation on the ground that nothing of a positive nature has materialized.It seems to me that this is going to be a very difficult feat of slack wire balancing. I find it difficult to believe that some discussion will not arise as a result of Nkrumah’s statement and, if opposition is shown to the plan he has proposed, then I foresee the likelihood of emotions being aroused on the basis of colour, and a solution of the South African situation on any negative basis becoming increasingly difficult.As I reported in my telegram† last week, Lord Home assured me that the Government has not considered a definite position in regard to the continuing position of Ghana if, in fact, their declared intention of union with Guinea and Mali were carried out. They still hope that this is a non-starter. However, it does seem somewhat unlikely that no comment about this possibility will be made and, if it is, I should think it likely that a discussion of the qualification for membership in the Commonwealth is likely to range over a fairly wide field.This brings me to a question which I think will have to be faced. Under the present procedure, the Secretary of State for Colonial Affairs supervises the negotiation and the final arrangements under which colonial territories become self-governing nations. Those who are already members of the Commonwealth have nothing to do with the situation at that stage. The constitution, form of government and various aspects of the rights of the citizens, are settled and then the other members of the Commonwealth are confronted with a fait accompli, and are apparently expected to accept the new member without having had anything to do with the details of his initiation. There are perhaps ten colonial territories which may be given self-government in the not-too-distant future and, having regard to some of the things that have already happened, I should think that the older members of the Commonwealth, and particularly Canada which was the birthplace of the whole concept of a Commonwealth of self-governing nations, might consider it wise that some basic qualifications for membership are recognized and that the mere act of conferring self-government under a procedure in which the other members of the Commonwealth have had no part will not in itself be regarded as qualification for membership.I have placed these thoughts before you because I have become increasingly concerned about the possibility that unless there are very clear ideas, particularly in the minds of those representing the older member of the Commonwealth, we may move forward into a period when there is so little common belief or purpose that it would become increasingly difficult to declare with any measure of conviction that the Commonwealth is a real fellowship of free nations.It has always been said that the Commonwealth and, in earlier days the Empire, could not be defined. Having said that, an attempt was usually made to define it by explaining that it was a voluntary partnership of self-governing nations under one Crown, which was the symbol of a common system of parliamentary government and equal justice to all its people assured by public hearings in impartial courts. We have already strayed a long way from that concept, and I find it difficult not to believe that if we stray much farther there may cease to be any reality in the claim that this is a unique fellowship of free nations.If you share my concern on any of these points, it seems that it might be highly desirable for you to raise them directly with Harold Macmillan, with the hope that he might give you some of his own personal ideas which perhaps go beyond anything he has yet discussed, even in his own Cabinet. If on the other hand you wish any points raised with him personally here in London, I could take them up with him at your request. I am sure he would speak to me with complete frankness.To return to the subject of South Africa and Ghana, it may be possible that it would be wise to seek some formula for delaying consideration of the particular issues they have raised if, in your opinion, the time has come to give consideration to the broader question as to what measure of real political freedom and justice for the individual should be an essential consideration of membership in the Commonwealth. I have written at this length because of my own growing concern that, if we simply drift along with no clear purpose, we may well drift apart.

Yours ever,GEORGE [DREW]

463. DEA/50085-J-40

Memorandum for Prime Minister

CONFIDENTIAL [Ottawa], February 9, 1961

The Changing Nature of the Commonwealth

At the forthcoming meeting in London the Prime Ministers are to consider two questions which have great significance for the future of the Commonwealth:

whether to deny continued membership to a state because its policies are deemed to be at variance with one of the principles of the multi-racial Commonwealth association; and

whether to admit a number of new members and thus alter drastically the racial balance among members of the Commonwealth, risk destroying the intimate and informal character of Prime Ministers’ meetings (by increasing the size of the group) and risk derogating from the prestige and importance of Commonwealth gatherings (by admitting small and relatively unimportant states). With this prospect in mind it was thought that it might be of interest to you to review briefly, in Part I of this paper, the significant stages in the development of the Commonwealth to date and to assess, in Part II, a number of suggestions for changing the nature of this unique association.

Part I

First Stage (1926-1947)

The first formal attempt to describe the status and mutual relationship of member nations was a pronouncement at the Imperial Conference of 1926 which described them as: “autonomous communities within the British Empire, equal in status, in no way subordinate one to another in any aspect of their domestic or external affairs, though united by a common allegiance to the Crown, and freely associated as members of the British Commonwealth of Nations.” As a commentary on this definition of status the conference added, “the British Empire is not founded on negations. It depends essentially, if not formally, on positive ideals. Free institutions are its life blood. Free co-operation is its instrument. Peace, security and progress are among its objects … and though every Dominion is now, and must always remain, the sole judge of the nature and extent of its cooperation, no common cause will, in our opinion, be thereby imperilled.” On December 11, 1931, the Statute of Westminster by legal enactment recognized the status of the Dominions as defined at the Imperial Conference of 1926.In this first stage the Commonwealth consisted of the U.K. and a group of independent states dominated by persons of European origin, sharing in general a common cultural and institutional background, enjoying relatively equal standards of living and already intimately acquainted with one another. To some of these states were attached various dependent territories. This first stage resulted from a desire to establish an acceptable form of relationship between the U.K. and a series of areas which had been colonized in whole or in part from the U.K. These colonies had matured to a degree where colonial relationship was no longer appropriate. It was not a struggle for freedom but rather a search for a relationship which would combine continued connection between the various members with the self-government called for by the maturity which had been reached. The solution reached was an agreed one, intended to be mutually advantageous. The constitutional aspect of the changed relationship was negative rather than positive, i.e., it removed practically all U.K. controls. There was no attempt to set up a positive constitutional framework since none had been found which could be agreed between the parties concerned. It was inevitable that there should be in this group a strong consciousness of bilateral relationships with the U.K. and much of that consciousness has remained.Second Stage (1947-1960)

The second stage began in 1947-49 with the admission of members which had been conquered rather than colonized, had no racial ties with the U.K. and did not wish to retain the formal link with the Crown. This change was symbolized by the declaration issued at the conclusion of the Prime Ministers’ meeting in 1949. “The Government of India have declared and approved India’s desire to continue her full membership of the Commonwealth of Nations and her acceptance of the King as the symbol of the free association of the independent member nations and as such the head of the Commonwealth. The governments of the other countries of the Commonwealth, the basis of whose membership is not hereby changed, accept and recognize India’s continuing membership in accordance with the terms of this declaration.” Canada played a considerable part in working out this formula which paved the way for the development of the new Commonwealth. Similar declarations were issued by Prime Ministers’ meetings regarding Pakistan in 1955, Ceylon in 1956 and Ghana in 1960.The resultant Commonwealth was multi-racial, the heavy majority of population being Asian; but the new states were by no means without political experience and judgment and were thought to be viable economically, politically and constitutionally. Further, all of these new second stage members had substantial populations. Each new member had an indigenous culture but had built its governmental and economic structure largely on British lines. These non-white areas had in common with the white group a bilateral relationship with the U.K. There was, however, an added and contradictory element to the degree that there was some affinity between these former colonial territories, based on race and on the fact that they shared some residual resentment of the former foreign domination. The departure of Ireland and Burma in this period demonstrated that a right of secession existed. This underlined the free and voluntary nature of the association.Third Stage

The 1960 Commonwealth Prime Ministers’ meeting may well prove to have initiated a new stage in Commonwealth development. For the first time the Prime Ministers declared publicly that they were not prepared to give advance consent to a charter member remaining in the Commonwealth after it became a republic. It is true that the South African case is not quite comparable to any previous one because the will of the South African people was in some doubt (unlike the cases of India, Pakistan, and Ceylon where there was all-party agreement in the national legislature and unlike Ghana where a plebiscite had already been held); nevertheless, there was a clear understanding that it was not so much this technicality which prevented the Prime Ministers from giving advance consent as their doubt about South Africa’s fitness for membership on more general grounds. The Prime Ministers established another important precedent, too, when they implied that an obligation of membership in the multi-racial Commonwealth was a consciousness of “the need to ensure good relations between all member states and peoples of the Commonwealth.” Few observers can have failed to realize that the decisions on membership and on racial relations were intimately connected and involved a new departure for the Commonwealth. Thus, in retrospect it may be seen that the Commonwealth has developed from a largely Anglo-Saxon group banded together partly for negative reasons, and with an automatic membership, to a rather multi-racial association with positive, if not clearly defined, aims and functions, in which membership is no longer considered a right but a privilege which may be revoked if a member fails to meet Commonwealth standards.

Part II

If, as seems possible, the Commonwealth is on the threshold of a new stage in its development it seems appropriate that possible future changes should be considered, especially by Canada which has had such a large hand in shaping the Commonwealth in the past. Various possible changes are considered below:

To develop a common foreign policy.This goal seems attractive at first glance and has been urged on various occasions in the past. The Imperial War Cabinet of 1918, the British Empire delegation at the Paris Peace Conference, the Imperial Conference of 1921 and the British Empire delegation at the Disarmament Conference in Washington represent the sole experiments in evolving common policy, corporately implemented. This phase had, however, a brief life. The cool attitude of Mr. King toward the sudden appeal from the U.K. in the Chanak affair and the tacit agreement of both governments that Canada should not be represented in the delegation at the Lausanne conference signified the end of the experiment in common policy. Similarly, Mr. King rejected ideas for some kind of council or committee which could at least attempt to co-ordinate main themes of policy. He repeatedly pointed to the adequacy of exchange of information and views which took place by a variety of less formal means. The fact of the matter is that a common foreign policy is not a practical possibility as long as the Commonwealth consists of independent governments with divergent views and many individual international problems. The most authoritative recent pronouncement on this question was your statement in the House on February 3, 1961.“Insofar as the objective of attaining disarmament is concerned, all the nations of the Commonwealth are in agreement, but I would make very clear that each nation speaks for itself. None of the nations can speak for the others on any matter connected with the individual responsibility and independence of the nations composing the Commonwealth.”The Commonwealth Prime Ministers’ meeting of 1955 also made an apt comment on the matter in its communiquéFootnote 3 which read “among its members are countries of importance in all quarters of the globe. Its strength and influence in the world today are derived from this and from a common outlook which, in spite of differences of geography, religion and race, evokes a broadly similar response to most international problems of the day.”

To formulate a series of Commonwealth principles or standards of behaviour to which all members would be expected to conform.This suggestion, like that of a common foreign policy, has often been made and at first sight it, too, seems attractive. However, it does not seem to be feasible to give any very precise or meaningful statement of the principles held in common by Commonwealth members. The possible principles that come to mind are:

The desire for peace. This is shared by all members (with the possible exception of Ghana, whose Congo policies have exhibited little concern for peace) but this principle is hardly an exclusive attribute of the Commonwealth;

The renunciation of aggression. India and Pakistan have argued that the other was guilty of aggression in Kashmir.

The settlement of international disputes by negotiation. South Africa has refused to negotiate its disputes with India and Pakistan over the treatment of people of Indo-Pakistani origin in the Union. Pakistan claims India has refused to negotiate over Kashmir.

The acceptance of democracy and the rule of law. Pakistan, Ghana and South Africa obviously do not conform to the British and Canadian concepts of these terms. They would argue, however, that they have only adopted new forms in order to meet local circumstances and that, as the Queen said on her recent visit to Karachi, “The forms are not sacred: the ideals behind them are. These ideals are often debated at great length, but I think that they can be said quite briefly: the service of God and the humanity of man to man.”

The right to civil liberties. The basic freedoms of speech and association are variously interpreted as between Canada and any of the new Commonwealth members. Freedom of the press has narrow boundaries in Ghana, for example, where criticism of the government may conveniently be classified as sedition.

Opposition to militant communism. It is questionable how far Ghana and Ceylon meet this test.

The acceptance of responsibility to work toward “freedom from want”. Here there is genuine agreement as expressed in the Colombo and other Commonwealth aid plans.

The desire to work for better relations among all races based on respect for the individual regardless of race, colour, or creed. South Africa is the obvious exception.

To devise acceptable criteria of membership to govern the admission of future candidates.In order to limit attendance at future meetings of Commonwealth Prime Ministers, it has been suggested that new candidates for membership would have to meet certain objective criteria. It has been proposed, for example, that a line might be drawn at a population figure of one million or at some arbitrary level of gross national product. Above this line independent territories would have the right to attend Prime Ministers meetings; below it they would not. The disadvantages of this solution have been set forth cogently by the officials who met at Chequers in JulyFootnote 4 to study this problem:“It has been an accepted principle of the Commonwealth that its members have equal rights and privileges within the Commonwealth regardless of their size; and this solution would offend against the principle. It could also be held to be illogical for countries which had achieved membership of the United Nations on equal terms with other Commonwealth members to be denied a similar position within the Commonwealth. Finally, it seems unlikely that many of the smaller countries would be prepared to accept membership on these terms.”Nor would the practical benefit be very striking. If the line were drawn at a population of one million it would restrict the size of meetings to eighteen, whereas if no line were drawn the membership would probably increase to a total of 24 at most.If, then, it is unlikely that the Commonwealth will change along the foregoing, frequently-suggested lines, we must consider other possible changes:

To give tangible proof of working for better relations among all races of the Commonwealth.As discussed under point (1) it would seem difficult to draw up a set of broad Commonwealth principles, but this need not mean that more emphasis might not be given, in other ways, to the most important of these principles – multi-racialism. You have said on numerous occasions that one of the main values of the Commonwealth is its function as a bridge of understanding between various races and cultures. It would therefore seem desirable to underline the principle of racial equality on which this relationship must ultimately rest. In the eyes of many, the Commonwealth may cease to stand for anything meaningful if it fails to follow up the multiracial assertions of the last meeting by demonstrating, that acceptance of the ideal of “good relations between all … peoples of the Commonwealth” is now a condition of membership.There are other ways too in which the Commonwealth could give concrete evidence of its aim of improving racial relations. The appointment of a distinguished Asian to a high judicial or state office (e.g., as Governor-General) in one of the old Dominions, for example, would dramatically symbolize “white” acceptance of the new multiracial Commonwealth. Again, the member states might consider founding jointly or singly a Commonwealth Race Relations Institute in which social scientists could make scholarly studies of racial problems. Perhaps Canada might fittingly suggest that such an institute have its headquarters in The West Indies which has set an example of harmonious relations between peoples of European, Asian and African origin.Footnote 5A new emphasis on the multi-racial nature of the Commonwealth need not affect the immigration policies of member countries. No country has advocated a common citizenship for the Commonwealth because all realize that it would derogate from the sovereignty of the individual members if they did not have the right to determine the size and type of their immigration. As early as the Imperial Conference of 1921, the Indian delegates concurred in a resolution recognizing “that each community of the British Commonwealth should enjoy complete control of the composition of its own population by means of restrictions of immigration.”

To focus on a series of direct multilateral relationships between the various members rather than to emphasize the paramountcy of the bilateral relationships between the U.K. and each individual member.The strong ties of all members with the U.K. are natural and commendable, but they should now be supplemented by encouraging closer direct links between, for example, Canada and Nigeria or Canada and The West Indies. The figure of the wheel has often been used to illustrate the Commonwealth relationship – with London at the centre joined by spokes to the various members on the circumference; our point is not that we should weaken the spokes but that we should strengthen the rim which joins all the ex-colonies together.To foster these closer relations you might consider advocating again that Prime Ministerial and other Commonwealth meetings should change their venue from time to time, not on any rigid rotational basis but often enough to demonstrate that London is not the only place where meetings can appropriately be held. You might also stress publicly that it is now a firm Canadian policy to give first priority to establishing close diplomatic contact with Commonwealth countries despite very real pressure from many foreign capitals for diplomatic exchanges.You might also consider imitating the British practice of passing a good deal of information, both in writing and orally, on a variety of international problems to all members of the Commonwealth. We do, of course, have a considerable exchange of papers with the U.K., Australia and New Zealand and there are also a fair number of oral exchanges with other members, on an ad hoc basis, at various levels and in various capitals. There is, however, practically no systematic exchange of papers between Ottawa and the new Commonwealth capitals. It is unlikely we would ever wish to exchange as much information with Asia and Africa as with London and Wellington; nevertheless, consideration might well be given to setting up a Commonwealth committee to study ways in which the exchange of a certain amount of political information might be facilitated. It would be necessary, however, to distinguish between the desirability of a voluntary exchange of information and opinion on the one hand and any obligation to consult (which might involve commitment) on the other. On the question of consultation, perhaps at some stage a Commonwealth meeting might wish to consider whether it could formulate a general guide to members along the lines of the suggestion made by the Imperial Conference of 1926. This suggestion was as follows: a government engaged in treaty negotiation or intending to take other international action which might be of immediate concern to other Commonwealth governments should, at its discretion, inform those other members who are considered to be interested; the recipients could then express their views if they wished, that is to say, to initiate consultation.Economic co-operation has been and will continue to be one of the most important ways of strengthening direct links between the members of the Commonwealth. One might emphasize particularly the exchanges of experts and students under the Colombo Plan and the Commonwealth Scholarship Programme because these foster not only technical knowledge but also a mutual appreciation of different cultures and races. One of the most significant developments of recent years has been that Commonwealth co-operation is now flowing in several directions with the countries of Asia extending modest technical and educational assistance to the new members in Africa.Closer Commonwealth links could also be forged by encouraging more study of the Commonwealth and its member nations in the educational institutions of the various countries. A few days ago the British Minister of Education expressed his concern at the lack of attention paid to the Commonwealth in the curriculum of British schools. Undoubtedly, the same comment could be made in other Commonwealth countries. One way of countering this might be to encourage more exchange visits with teachers and journalists of other Commonwealth countries. We might also call for the setting up of chairs of Commonwealth studies in Canadian and other Commonwealth universities and encourage the writing of a series of books on “the Commonwealth to-day.”Even this brief review of Commonwealth history makes it evident that the association has always had a great facility for development and adaptation to changing circumstances. Some of the developments in the past would seem to have come about more by a process of natural evolution than because of conscious direction and forethought. At this critical juncture, it seems desirable that Commonwealth leaders give serious consideration to whether some changes might from now on be consciously implemented in order to further the development of those great potentialities for good which the Commonwealth has always possessed.

464. DEA/50085-J-40

Memorandum from Special Assistant to Secretary of State for External Affairs to Under-Secretary of State for External Affairs

SECRET [Ottawa], February 11, 1961

South Africa

On February 10 the Prime Minister said that he had had a talk about South Africa and the Commonwealth with Lady Jackson (Barbara Ward), whose views had been of considerable interest to him. While she had not explicitly advocated that South Africa be forced out of the Commonwealth, she had said that if South Africa were to be allowed to stay in, the pressures in countries such as Ghana, Nigeria and Malaya would be so strong that in a comparatively short time the withdrawal of the non-white nations would follow. Lady Jackson had also said to the Prime Minister that she favoured a declaration of principles for the Commonwealth. The Prime Minister said that she seemed to think that such a declaration would be valuable as a statement of objectives which member countries should constantly be striving to attain.

The Prime Minister went on to say that his first aim at the Prime Ministers’ Meeting would be to try once again to bring about some concession on the part of South Africa, a concession of sufficient significant to forestall extreme measures such as the refusal of consent to South Africa’s continuing membership. If, despite all efforts at persuasion, Dr. Verwoerd were to make it clear that he was not prepared to make concessions of significance, the Prime Minister said that he favoured “postponement.” I am not sure, but will try in due course to determine, whether the Prime Minister meant that consent would be withheld pending developments or whether consent would be given and the question of South Africa’s membership re-examined at a future meeting.

I have reported separately on the Prime Minister’s reaction to the memorandum of February 6 regarding South Africa’s candidacy for the Security Council.Footnote 6 You will note that while the Prime Minister was interested in the idea of raising the Security Council problem at the Prime Ministers’ Meeting, he was not prepared to decide now whether or not he would put it forward. This I take to be consistent with Mr. Diefenbaker’s continuing hope that the combined efforts of the Prime Ministers will be successful in eliciting some promise of concessions from Dr. Verwoerd or in discovering some other respectable way of taking the heat off.Footnote 7

H.B. R[OBINSON]

465. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], February 11, 1961

Present

The Prime Minister (Mr. Diefenbaker) in the Chair,

The Secretary of State for External Affairs (Mr. Green),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of National Revenue (Mr. Nowlan),

The Minister of National Defence (Mr. Harkness),

The Minister of Fisheries (Mr. MacLean),

The Solicitor General (Mr. Browne),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of Agriculture (Mr. Alvin Hamilton),

The Minister of Defence Production (Mr. O’Hurley),

The Minister of Public Works (Mr. Walker),

The Associate Minister of National Defence (Mr. Sévigny),

The Minister of Forestry (Mr. Flemming),

The Minister without Portfolio (Mr. Halpenny).

The Secretary to the Cabinet (Mr. Bryce),

The Assistant Secretary to the Cabinet (Dr. Hodgson).

South Africa; Canadian Policy

The Prime Minister said he wished to obtain the views of his colleagues on the position he should take at the Commonwealth Prime Minister’s Conference on the readmission of South Africa to the Commonwealth as a Republic. He had obtained reports on the views of other Commonwealth countries.†Pakistan would probably condemn the apartheid policy but would not take the initiative in proposing that South Africa be denied membership. The Pakistan government believed that South Africa should remain in the Commonwealth, so that other members might be able to influence them in future years. It was assumed that the unanimity rule would apply at the Conference. Pakistan would not decide in advance whether or not they would propose rejection of an application from South Africa for readmission.Ceylon would probably follow Canada in any stand this country might take. A strong and adverse reaction would be expected however, both in Ceylon and generally throughout the Afro-Asian countries, if South Africa should be simply welcomed into the Commonwealth without a resolution that non-discrimination was a basic principle of the Commonwealth. Any such resolution should be proposed by one of the “white” nations, and need not mention South Africa directly.Ghana had originally favoured a policy of condemning apartheid but admitting South Africa. Nkrumah had spoken of the distinction between acceptance of the territory of South Africa within the Commonwealth, as contrasted with approval or recognition of the present government of that country. Recently, however, the opinion of the Ghana government had been hardening. A few days previously he had met Lady Jackson (Barbara Ward), wife of Sir Robert Jackson, a senior adviser to Nkrumah, who had stated that, unless strong action was taken at the Conference, the various new African governments might soon be defeated and replaced by communist or pseudo-communist regimes.Nigeria shared the Ghanian view that South Africa should not be readmitted.In India, the view was that the position of the South African negro had become worse since the previous Commonwealth Conference, and that the influence of the Commonwealth had been disappointing. Mr. Nehru had stated that South Africa represented a crucial test of Commonwealth solidarity. The U.K. government in particular, though not the British public, had been vacillating in its attitude. India thought that apartheid should be condemned and that South Africa should be readmitted on “probation,” i.e., on the specific understanding that its policies would be modified. India would probably not take the lead at the Conference.South Africa, on the other hand, was taking the position that its membership should be automatic. In a recent speech, Mr. Verwoerd had stated that his mandate was to constitute within the Commonwealth, but he “would not pay any price” in terms of permitting interference in the domestic policies of his country, particularly as he had been elected on the basis of those policies. Any such interference would be a reflection on South Africa’s national honour. This speech may have been made to prepare Mr. Verwoerd’s followers for a break with the Commonwealth.The United Kingdom was obviously taking all possible steps to promote the readmission of South Africa, and U.K. spokesmen were using different arguments in different countries. United Kingdom policy had reached the opposite pole from the position expressed a year ago by Mr. Macmillan in his “Winds of Change” speech.Australia would probably support the British position.New Zealand would probably do the same, but was having difficulty in determining its policy. Their national football team had been obliged to leave its Maori members at home during the team’s recent visit to South Africa, and this had caused serious criticism.Malaya was unlikely to take the lead in opposing readmission.In general, the non-white nations were watching Canada, and were hinting that they would support Canada in opposing readmission of South Africa. He would be the second speaker on the subject, following Mr. Macmillan, in order of seniority.

The Secretary of State for External Affairs said that at the Conference the Prime Minister should state categorically that Canada opposed apartheid and would not support the election of South Africa to the United Nations Security Council. Other Prime Ministers would probably follow this lead, and South Africa might then withdraw from the Conference before the more difficult question of Commonwealth membership arose directly.The Conservative party had always been for the Commonwealth and if the Canadian government led the move to exclude South Africa, it would suffer severely at the polls. The treatment of South Africa at this time was of crucial importance. It could be the step leading to the break-up of the Commonwealth, particularly as Ghana and some other new nations had no strong reason for desiring to continue as members. Canada should not be responsible for possibly destroying the Commonwealth.Another question was whether the South African issue should be debated in the House of Commons prior to the Conference. He believed this would be undesirable, because it would lead to acrimonious debate and would make the Prime Minister’s position at the conference more difficult.Apartheid was condemned by most nations, but the question of readmission of South Africa was really a separate question with separate implications. Canada would vote for the admission of Cyprus, despite the record of Prime Minister Makarios. In these circumstances, it would appear inconsistent to oppose the membership of a nation that had fought by Canada’s side in two world wars and had produced a man like General Smuts.

During the discussion the following points were raised:

The crisis would not be averted by stating at the Conference that Canada would oppose the election of South Africa to the United Nations Security Council because of its racial policy. Mr. Verwoerd had made it clear that he would lead his country out of the Commonwealth if the other members interfered in South Africa’s domestic affairs. On the other hand, if the crisis was precipitated on the issue of Security Council membership, the initiative in leaving the Commonwealth would be taken by South Africa.

The strongest argument in favour of admitting South Africa was that refusal would involve betrayal of the negro population and of the 40 per cent of the white electorate that opposed Mr. Verwoerd. The South African opposition party favoured apartheid, but in a less extreme form. Some years hence, the government of South Africa would change, and the other nations would have less influence upon the country if it had meanwhile been excluded from the Commonwealth. There had been some recent signs of a possible softening in the attitude of the Boers. For example, eleven clergymen of the Dutch Reform Church had published a book condemning apartheid.Footnote 8

The Canadian people as a whole had shown no strong views on the subject of apartheid. Various leading newspapers, however, had published editorials urging that South Africa be denied admission. The Cabinet at a subsequent meeting should review the recent newspaper reaction.

The Commonwealth was one of the strongest forces for peace, and should be held together by all possible means. It represented the main hope of preventing relations between the United States and U.S.S.R. from becoming progressively more hostile.

The Canadian public were strongly loyal to the Commonwealth and would strongly condemn the government if it took any action that might imperil Commonwealth solidarity.

South Africa might have improved the situation by giving some degree of representation in its legislature to the Bantu population, but had, in fact, done nothing since the last Commonwealth Conference to modify its position. On the other hand, the excesses of the Mau Mau in Kenya and the disorder in the Congo suggested that perhaps the present was a poor time to expect concessions by the Boers.

Some Ministers said that, in view of the recent admission of various nations to the Commonwealth, the white members were already in a minority, and their position would be still weaker if South Africa ceased to be a member.

Some said that the exclusion of South Africa might, in fact, strengthen the Commonwealth as a multi-racial family, and might give the new nations a stronger reason for continuing as members. Apart from this, no common principle united these nations. Ghana would not be in the Commonwealth if it were confined to those nations that followed parliamentary principles; neither Ghana nor Ceylon if the rule of law were a principle necessary for membership involved freedom of worship.

For 25 years Mr. Diefenbaker had been regarded by the Canadian public as a strong proponent of freedom of the individual, and of civil rights. The Bill of Rights was closely associated with his name. This reputation had greatly added to the strength of the Conservative party. The government and the party might both suffer serious loss of support if Mr. Diefenbaker agreed to the readmission of South Africa to the Commonwealth. The Liberal party would also be given an opportunity to pose as the champions of freedom.

Some Ministers said that, if the non-white nations of the Commonwealth were not prepared to take the lead at the Conference, Canada should not do so. A change in the order of speaking was highly desirable from Canada’s viewpoint. For example, the delegate from the most junior member-country might speak first. Mr. Diefenbaker was clearly in the most difficult position, and he could hardly take the initiative to seek a change in the usual procedure.

It was easy for Canadians to condemn the apartheid policy, because Canadians would not have to face the alternative. The Canadian government had given the vote to the Indians, but this group was not sufficiently numerous to threaten to take political control. The Boers had settled in South Africa before the Bantus, and if the Boers’ immigration policy had from the outset been like Canada’s at this time, the negroes would still be in a very small minority there.

South Africa was at this time a member of the Commonwealth, and would not become a republic until the end of May 1961. The communiqué issued at the time of the last Commonwealth Conference Footnote 9had stated that, subsequently to “deciding” to become a republic, South Africa might seek readmission to the Commonwealth if it so desired. The Bill to constitute the republic had passed second reading but had gone no farther. In these circumstances perhaps it could be contended that South Africa had not yet “decided” to become a republic and that therefore the Conference should not deal with the hypothetical question of the country’s future status.

The Cabinet agreed to discuss further, at another meeting, the policy to be expressed on behalf of Canada at the Commonwealth Prime Ministers’ Conference, on the readmission of South Africa to membership in the Commonwealth as a republic.. . .

466. DEA/50085-J-40

High Commissioner in United Kingdom to Prime Minister

SECRET AND PERSONAL. London, February 23, 1961

My dear John [Diefenbaker]:I shall do my best to sum up as briefly as possible in this letter some of my impressions in regard to the South African situation as it has been developing recently. I shall send you a further letter in more detail which I hope will reach you on Monday. I do want to place certain thoughts before you, however, as speedily as possible.In one of our recent telephone conversations we discussed the possibility of persuading the newer members of the Commonwealth to speak first on the South African question. As recently as yesterday I sounded out the High Commissioners for Malaya, Ceylon and Nigeria, separately of course, and I am sure that it will be impossible to persuade them to take the lead. It is obvious that the countries represented by those I have mentioned, as well as Ghana, India and probably Pakistan, are looking to Canada for a declaration of our position.At the same time I should say that even those who might be expected to hold the strongest views seem to be cautious about adopting a course which might mean the exclusion of South Africa. There is little doubt that this is in part the result of the very active campaign which has been carried on by Duncan Sandys and officials of his department to support the proposition that the internal policies of any member of the Commonwealth are not a subject for consideration at a Commonwealth Conference. I do not think, however, that it can be assumed that their attitude is only the result of the arguments which have undoubtedly been placed before them. I gather the impression that they all have some concern about how far the trend might develop if it is once established that membership in the Commonwealth is subject to approval of domestic policies. I have an idea that all of them think that some aspects of their own domestic activities might be subject to question. I have little doubt that this is the reason why Australia is so firm in stating its belief that domestic policies are not a subject which should be discussed at this conference. It is sometimes forgotten that they have a very important color problem of their own. As you know they have administrative responsibility over New Guinea and Papua. In the two islands there are about 25,000 whites and a minimum of 2,000,000 natives. The figure may be much higher than that because extensive areas have never even been surveyed. That territory is administered by a Legislative Council of 36, of whom a minimum of 11 are to be black, but under the present law even with the few added appointments which can be made they will always be a minority in the administrative Council. There is no representative in the Parliament at Canberra, but the administrative direction is in the hands of an Administrator appointed by the Federal Government. I merely mention this to indicate that there are practical considerations why Australia and even New Zealand are a little hesitant on this point.Having said that, I think it is clear that if you took a definite stand against permitting South African to remain in the Commonwealth, you would be followed by India, Malaya, Ceylon, Ghana, Nigeria, and probably Pakistan.I need not repeat any of the arguments as to why Canada should take a firm stand on this subject. Nobody in the Commonwealth has more clearly stated the principles of human rights and equality under the law than you have personally. It is difficult to rationalize any implied suggestion of approval of South Africa’s course with those principles.I think it is right, however, that I put before you thoughts which I have heard expressed in the past few days which might perhaps have some bearing on the decision which you must make, if you should come to the conclusion that those in South Africa who do not support apartheid, and that includes the leaders of all the churches except the Dutch Reformed Church, and even some of them, should be given a further opportunity to work for legislative reforms within the framework of the commonwealth.It has been suggested that no machinery exists within the Commonwealth to conduct enquiries or take any action in regard to internal policies of the governments of any of the member states. They are, however, all members of the United Nations, which has the machinery and has the power to conduct such enquiries and take such action as may be supported by the United Nations.This may be a specious argument, but I did not think I should ignore the suggestion which has been made that this situation could be met by the statement that any of these questions can be dealt with through the United Nations, whereas neither the machinery nor the authority exists to deal with them within the Commonwealth. If such a position were regarded as tenable, a statement to that effect could of course be accompanied by an unqualified declaration of disapproval and rejection of apartheid and the treatment of minorities by the present South African Government.I leave the subject there for the moment. This point of view, however, was only put forward today, and I wanted to pass it on immediately for what it is worth. I shall amplify my thoughts on this subject in a further letter tomorrow.

All of the bestYours everGEORGE [DREW]

467. J.G.D./MG01/XII/C/404

Memorandum from Secretary of State for External Affairs to Prime Minister

SECRET [Ottawa], February 24, 1961

South Africa and the Commonwealth

A further study has been made of the question of what action might be proposed or should be taken in respect of the continued presence of South Africa in the Commonwealth.

The following factors appear to be of particular significance at the present time:

South African membership is, because of that country’s racial problems, set in the ferment taking place in the whole of Africa. It could be argued either that its exclusion or withdrawal could influence a break-up of the Federation of Rhodesia and Nyasaland or, on the contrary, that the continued membership of South Africa could weaken the Commonwealth and Western position in the continent as a whole;

There is no ready reconciliation between the accepted doctrine of diversity within the Commonwealth on the one hand and, on the other, the general concept of common support of basic principles and ideals;

Though final positions have not been taken in the various Commonwealth countries, there is evidence of differences. In this connection it is obviously desirable to avoid a division on colour lines;

As to the position within South Africa, it seems evident that the present Government can command a sufficient majority in Parliament and will probably remain in office for some time. Dr. Verwoerd would then be politically safe in maintaining an intransigent position. On the other hand, there is below the surface a real difference within the Nationalist Party between the die-hards in the Transvaal and the more liberal wing in the Cape. Strong and not insignificant opposition to the present Government’s attitude on the complex of racial policies and Commonwealth membership has been shown by the Opposition parties and, perhaps more significantly, by important sections of the Dutch Reform Church. How far this opposition to extreme policies can influence the Government or when that influence might occur is unknown;

There is within Canada and elsewhere wide public interest in the membership of South Africa in the Commonwealth and this interest can be anticipated as increasing through the press and through various African groups in London.

Given these circumstances, it does not seem probable that the substantive question of South African racial policies can be avoided at the London meeting, or that no discussion would take place. It is perhaps a safe presumption that in some way the countries of the Commonwealth must register their support of progress toward racial equality, though it would be difficult to find an expression which the South Africans could support.

The difficult question remains of how best to approach this matter, bearing in mind both the force and diversity of opinion and the possibility that Dr. Verwoerd would withdraw from the meeting and perhaps from the Commonwealth if there were any discussion of what he regards as domestic affairs.

From what is known now it seems not unlikely that some of the Prime Ministers would be prepared to accept South African membership unconditionally, while others might take an extreme line in the other direction. If this is true, there is an argument in favour of initiating a middle course which might attract a consensus and might conceivably not provoke complete resistance by South Africa.

Of the possible approaches, three in particular suggest themselves:

By reference to the Commonwealth seat on the Security Council in the discussion of United Nations Affairs to demonstrate that apartheid has Commonwealth and international repercussions – and cannot any longer be regarded solely as a matter of domestic policy;

By drawing attention to the serious gap between the views of some members and those of South Africa on the principle of racial equality, and reflecting this absence of agreement in a passage in the communiqué;

The optimum and perhaps most difficult solution would be found only if Dr. Verwoerd were prepared to be conciliatory and to forecast a gradual amelioration of his policies. While such an amelioration could hardly be closely defined, it might be sufficient to satisfy that large body of opinion which criticizes South Africa for proceeding consistently in the wrong direction.

H.C. G[REEN]

468. DEA/50085-J-40

High Commissioner in United Kingdom to Prime Minister

PERSONAL AND CONFIDENTIAL London, February 24, 1961

I would not add to your burdens at this time were it not for the fact that the decision you will be called upon to make in regard to South Africa must be one of the most difficult with which you have been confronted, and certainly few decisions will have more far-reaching consequences.The explosive developments in different parts of Africa, culminating in the vigorous dispute between Sir Roy Welensky and the British Government during the past forty-eight hours,Footnote 10 have undoubtedly produced an emotional tension in regard to any racial questions, which will make it much more difficult to conduct an objective discussion of apartheid and its effect on South Africa’s continuing membership in the Commonwealth. Only today the High Commissioner for Nigeria said to me that, if this had happened earlier, it might have been best to find some excuse for postponing the Conference. I am sure this reflects a general sentiment in London, but obviously it is now too late to contemplate that possibility. My impression is that there is a growing sentiment, as much on the part of those members of the Commonwealth who might be described as coloured as in the case of those who would be described as white, in favour of finding some device by which a clash with South Africa at this time may be avoided.I shall approach the subject, therefore, from that point of view. As I said in my letter yesterday, I need put forward none of the arguments as to why a stand should be taken against South Africa’s continued membership. I shall, therefore, put before you the other side of the case and, in doing so, I need hardly say that my views on racial discrimination are similar to your own. In fact, you will recall that I was responsible for the introduction of the first Anti-Discrimination Laws in Canada when they were introduced in Ontario. I put forward those points which it seems to be might be given consideration if there should be a general decision that, if possible, it is unwise at this time to do anything which might have a chain reaction throughout the whole of Africa. In the ordinary course of events, the decision by the Government of South Africa to change from a monarchical form of government to a republic would raise no problem. In fact, such a change has been made by Ghana without any question being raised.Is it not true, therefore, that the decision to become a republic really has no bearing on whether South Africa continues as a member of the Commonwealth, so long as they express their desire to do so.The real question which is in everybody’s mind is, of course, apartheid and their racial policies generally. That is something which could be dealt with at any time regardless of whether a member of the Commonwealth is a monarchy or a republic. It does seem, and there is considerable argument being put forward in support of this point, that if there are to be conditions of membership then those conditions should be established in some definitive form, and should apply equally to every member of the Commonwealth.If it were decided that a clear distinction should be made between South Africa’s status as a republic and the question of apartheid, then it would seem that South Africa might be permitted to remain a member as a republic, simply by the absence of any opposition to that course. It would then be possible to raise the question of apartheid, and since nobody is in any doubt, least of all the South Africans themselves, that this is a very real issue, it might be possible to set up a continuing committee of senior officials to examine the terms upon which membership may be granted and continued. In fact, I should think it is becoming clear that some such definitions in the broadest terms should be established in any event.If we say “no” to South Africa at this time, we are in effect saying that South Africa does not conform to the rules of the club, and we must admit at the same time that there are no rules. Even though we were inclined to talk about the impossibility of accurately defining the relationship within the Commonwealth, we did in fact define that relationship in fairly simple terms. First, we had a common allegiance to one Crown. Each member of the Commonwealth was a monarchy. We had a common parliamentary system, and each expressed its belief in the personal equality of their citizens, and each claimed a similar system of judicial procedure. Now those rules no longer apply, not only in South Africa but in several countries of the Commonwealth. Is it not arguable, therefore, that before we expel any member of the club for a breach of rules there should be some rules no matter how simple and elementary they may be.Postponement of consideration of the situation in South Africa, as distinct from the question regarding the fact that they are now a republic, perhaps could be argued on the ground that the United Nations is already seized with this problem and that all members of the Commonwealth are members of the United Nations. But that would not, of course, fully dispose of the question. It does seem possible that the committee of officials, which met at Chequers last year to discuss problems relating to the future of the Commonwealth,Footnote 11 might be continued in operation under clearer instructions and that something in the nature of rules and conditions might be formulated for recommendation to another Conference.I know that this will not be a decisive factor in coming to a conclusion as to what course should be followed, but there can be no doubt that a stand taken against the continuing membership of South Africa at this particular time, and in the atmosphere which has developed in the past few weeks, would be resented and very greatly regretted by the United Kingdom, Australia and Pakistan, as well as South Africa. I include Pakistan in this group because of a telegram received only today indicating that Ayub Khan is strongly opposed to the exclusion of South Africa, although he will speak strongly against apartheid and urge a modification of South African policy. In this respect his views seem to be similar to your own, but this seems to be the first indication of strong personal opposition on his part to a course which would result in the exclusion of South Africa.If this alternative point of view has any merit, then I suggest that a clear distinction be drawn between the question of South Africa’s decision to become a republic and the problems raised by apartheid and racial discrimination generally. If that is done, it does seem possible, while condemning in the strongest terms the principles of apartheid, to point out that this is before the United Nations, and that the whole question of the relationship of the members of the Commonwealth to each other should be considered most carefully by a committee of officials.I know that you are faced with a cruel dilemma, and I have merely sought to put forward different points of view in the hope that they may contribute something to the consideration of this vitally important subject.

[GEORGE DREW]

469. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], February 25, 1961

Present

The Prime Minister (Mr. Diefenbaker) in the Chair,

The Secretary of State for External Affairs (Mr. Green),

The Minister of Finance (Mr. Fleming),

The Minister of Trade and Commerce (Mr. Hees),

The Minister of Transport (Mr. Balcer),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of Justice (Mr. Fulton),

The Minister of National Revenue (Mr. Nowlan),

The Minister of National Defence (Mr. Harkness),

The Minister of Fisheries (Mr. MacLean),

The Minister of Labour (Mr. Starr),

The Solicitor General (Mr. Browne),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of National Health and Welfare (Mr. Monteith),

The Minister of Agriculture (Mr. Alvin Hamilton),

The Minister of Defence Production (Mr. O’Hurley),

The Minister of Public Works (Mr. Walker),

The Associate Minister of National Defence (Mr. Sévigny),

The Minister without Portfolio (Mr. Halpenny).

The Secretary to the Cabinet (Mr. Bryce),

The Assistant Secretary to the Cabinet (Dr. Hodgson).

South Africa; Canadian Policy

The Prime Minister said that further consideration should be given to the position he should take on South Africa at the Commonwealth Prime Ministers’ Conference. During the previous discussion in the Cabinet, most Ministers had said that, if a decision could not be deferred and if Mr. Diefenbaker spoke second on the subject in London, he should condemn apartheid but should support the readmission of South Africa to the Commonwealth. Other Ministers had said that such a position would be very damaging to Mr. Diefenbaker and to the Conservative party in Canada, because it would seem incompatible with the public position he had taken for many years on equality of rights.The problem had become even more difficult in the last few days because of events in Rhodesia, Nyasaland and the Congo. At the Commonwealth Conference it seemed likely that Nigeria and Ghana would insist that the South African natives be given racial equality if the Commonwealth was to continue as a multiracial family of nations.He outlined the kind of statement he might make at the Conference. He would emphasize that the South African policy of apartheid was unacceptable to Canada, and that the upsurge of nationalism in many new countries made apartheid more than a domestic question. South Africa would not be accepted as a member of the United Nations Security Council. The difficult situation would be greatly helped if the South African government would, as a compromise, offer some degree of parliamentary representation to its native population. Recent events in Nyasaland, Rhodesia and the Congo made the present a poor time for consideration of an official application from South Africa. In any case, as that country had not yet made effective its legislation on its proposed status as a republic, an application for readmission to the Commonwealth would be premature.If such a statement was made, Premier Verwoerd would probably withdraw from the Conference because he had previously stated that he would do so if any Prime Minister criticized South Africa’s policy. Mr. Diefenbaker said that in these circumstances he as Canada’s representative would be criticized for having taken the initiative on South Africa and having thereby damaged the solidarity of the Commonwealth. On the other hand he obviously could not condone apartheid.

During the discussion the points raised in previous discussions were further explored and in addition the following points were raised:

Some Ministers said that a debate on South Africa in the House of Commons might provide tangible evidence of the state of Canadian public opinion. The government would then face less criticism if Premier Verwoerd should withdraw from the Conference following a statement by Mr. Diefenbaker.

Most Ministers said there should be no debate on South Africa prior to the Conference. Such a debate would be bound to restrict Mr. Diefenbaker’s freedom of action, and might prevent him from playing a constructive role at the Conference. If a debate should be held, the Prime Minister would be obliged to speak and to take a definite position in the matter, thereby disclosing his intentions prior to the London meeting. The opposition parties had previously declared their views on the subject, and as they had not requested a special debate at this time, it was reasonable to assume that their views had not changed materially.

At the Conference, Mr. Diefenbaker could not propose a change in the usual order of speaking. Prior to the conference, however, he would raise the question with Prime Minister Macmillan, pointing out that all Commonwealth nations were regarded as equal, and that some of the newer members might speak more freely if they spoke first.

Some Ministers said that public opinion in Canada had become reconciled to the prospect that South Africa might leave the Commonwealth. The public would not favour a compromise on a fundamental issue of human rights, merely in order to retain the membership of that country.

Although theoretically apartheid and readmission were separate issues, in practice they could not be divorced. The apartheid aspect was by far the more important, and an equivocal position on civil rights would be damaging to Canada’s international position and to the Prime Minister’s national position. If Premier Verwoerd insisted on forcing the issue of readmission at this time, it was not unreasonable to require him to make some compromise on apartheid as the price of readmission.

The situation was so complex, and it involved so many cross-currents, that tactics would probably play a leading role at the Conference. Therefore the Cabinet should not attempt to formulate a policy on the subject in detail at this time, but should authorize the Prime Minister to use his own best judgment on the course he should take in the discussions.

The Cabinet agreed,

that the Prime Minister should be authorized to use his own best judgment in determining, in the light of the situation that might develop at the forthcoming Commonwealth Prime Ministers’ Conference, and consistently with the general tenor of the discussions in the Cabinet, the position he should take in discussing the South African question at the Conference;

that, if Ministers wished to make suggestions on a statement that might be made in the House of Commons by the Prime Minister prior to his departure for the Conference, they should send their proposals to him in writing as soon as possible; and,

that the question of Canadian policy on South Africa should be further discussed at another meeting of the Cabinet.. . .

I advised him that the name of the building was to be the “Sir John A. Macdonald Building.” This was the unanimous choice of the Colleagues.

Open hearing on South Africa particularly in view of what is happening in Rhodesia. We hear that when the Conference is on there are going to be a lot of demonstrations here and there, in Africa and in the countries there outside the Commonwealth. No one knows what Nkrumah is going to do. I am not going to present the suggestion that I made to you that because of the fact that the coloured races have the majority this time and therefore should say first what they feel. As soon as you get to South Africa’s Prime Minister no matter how he endeavours to smooth it over he will rub them up and down. What we will say will be in every way contrary to that policy. It will be very strongly condemnatory, and the British want to get it decided now. It is no time now with the situation in the Congo and generally throughout Africa, and in view of the fact that it has been made perfectly clear by South Africa at the 1959 Conference that readmission to the Commonwealth is not automatic, that it is felt that this should be postponed and he should postpone becoming a Republic. If he wants to walk out this is fine. I am going to speak strongly in condemnation. Their talk of taking it to the Security Council is entirely non-existent. The coloured situation everywhere in the world has ceased to be a domestic matter and however much standards have been raised we do not see how a policy like that, no matter what resiliency, can lead but to disaster. United Nations Charter not unanimous – voted 6 to 1 in favour of throwing them out. May be influenced somewhat by C.C.F. tendency. No demand in Parliament for a debate. If we get into a debate I am in a straight jacket. I cannot ask Parliament what I am going to do. The Liberal Party in January condemned apartheid in strong language but deleted the portion that South Africa be thrown out,Footnote 12 so their teeth have been drawn.. . . . . . . . . .We cannot throw them out. I will be condemned for breaking up the Commonwealth. We must make clear our condemnation of this.. . . . . . . . . .No vote for throwing them out. He will speak so late that all the firebrands will have spoken before.. . . . . . . . . .That is why we are keeping quiet. If they have their say first I go along and talk caution. Then if he throws himself out it will be up to me. If Menzies knows this then he will clear with the others and they will arrange some other alternative.

[J.G. DIEFENBAKER]

471. DEA/11827-40

Memorandum from Special Assistant to Secretary of State for External Affairs to Prime Minister

CONFIDENTIAL [Ottawa], February 27, 1961

South Africa

On a number of occasions you have underlined the importance which you attach to the stand taken by the South African Prime Minister at the meeting in London. You have recently indicated your hope that, despite his public refusal to entertain any compromise on racial policy, he might yet be brought at the meeting to accept and act upon the arguments for making or at least undertaking to make some significant concessions.

We do not really know how high a value Dr. Verwoerd places on Commonwealth membership, nor indeed the degree to which he may be open to persuasion from other Prime Ministers. It does seem, however, that there would be merit in making some of your views known to the South African Government before Dr. Verwoerd leaves for London. This would pave the way usefully for your conversations with him in London. It would show that you were approaching the problem in a spirit of cooperation and that you had no thought of insulating yourself from discussion with him. Although it seems unlikely that Dr. Verwoerd will come to London with even a partially open mind, a word from you as Prime Minister of Canada, might well have a useful psychological effect at this time. Should you find it necessary during the meeting to take a stand against South Africa it might be helpful to be able to recall that you had made known to Dr. Verwoerd in advance of the meeting the intensity of your concern.

What we suggest is that you might yourself call in the South African High Commissioner and tell him frankly how concerned you are about this situation. You could point to your record as an advocate on the one hand of the Commonwealth and on the other of racial and other forms of equality. You could say to him quite frankly that the decision facing the Prime Ministers as a result of South Africa’s action placed you in a most difficult position; that you recognized the contribution which South Africa has made through the years, including two world wars, to the Commonwealth and the free world in general; and that you were most reluctant to do anything which would contribute to a weakening or a cutting of South Africa’s links with other Commonwealth countries.

Presumably you would also say that at the same time you felt that racial equality must inevitably be one of the central aspirations held in common by Commonwealth countries; that there was a real danger that the association would break up or wither away unless this was recognized; that you thought that the Commonwealth association had a role to play in the modern world and that this role was too important not to be developed; and that it was your hope that in the future South Africa would be a part of, rather than apart from, this process. This could only be the case if there is some evidence of change in South Africa’s policy and action on those matters which have attracted so much attention throughout the world.

You could then say you thought it only proper that you should speak frankly through the High Commissioner to his Prime Minister so that Dr. Verwoerd would not go to London under any misconception of the principal elements in your thinking. You could go so far as to add that it was your most earnest hope that even at this late hour the Union Government might find it possible to make some significant move, for instance toward non-white representation in Parliament. If this could be done, you could say the pressure for preventing South Africa’s continued membership admission might be less in evidence at the meeting.

We think that it would not be wise to go beyond this. You would not want to preach to the South Africans, nor would you want to imply that if they do not heed your words you will retaliate against them. You would merely be giving them a private insight into the Canadian dilemma, and leaving them to form their own conclusions.

H.B. R[OBINSON]

472. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], March 2, 1961

Present

The Prime Minister (Mr. Diefenbaker) in the Chair,

The Secretary of State for External Affairs (Mr. Green),

The Minister of Finance (Mr. Fleming),

The Minister of Trade and Commerce (Mr. Hees),

The Minister of Transport (Mr. Balcer),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of Justice (Mr. Fulton),

The Minister of National Revenue (Mr. Nowlan),

The Minister of National Defence (Mr. Harkness),

The Minister of Citizenship and Immigration (Mrs. Fairclough),

The Minister of Fisheries (Mr. MacLean),

The Minister of Labour (Mr. Starr),

The Postmaster General (Mr. William Hamilton),

The Solicitor General (Mr. Browne),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of National Health and Welfare (Mr. Monteith),

The Minister of Defence Production (Mr. O’Hurley),

The Associate Minister of National Defence (Mr. Sévigny),

The Minister of Forestry (Mr. Flemming),

The Secretary of State (Mr. Dorion),

The Minister of Northern Affairs and National Resources (Mr. Dinsdale),

The Minister without Portfolio (Mr. Halpenny).

The Secretary to the Cabinet (Mr. Bryce),

The Assistant Secretary to the Cabinet (Dr. Hodgson).…

South Africa; Canadian Policy

(Previous reference February 25)

The Prime Minister said that on the previous day he had informed the South African High Commissioner that he intended to condemn apartheid strongly in his opening remarks at the Commonwealth Prime Ministers’ Conference. He had suggested that the High Commissioner should inform Mr. Verwoerd that Canada would not be deterred by the warning that the South African Prime Minister would withdraw from the Conference if the apartheid policy should be criticized there. Mr. Diefenbaker said he had also informed the High Commissioner that he would propose that the question of readmission should be postponed for a year, both because of recent events in other African countries and because South Africa’s final action to become a republic was not to be taken until March 24th.The Canadian High Commissioner in the United Kingdom had held discussions with representatives of Commonwealth countries in Asia, and had learned that none of them would in any circumstances be prepared to speak first at the Conference. The Commonwealth countries other than the U.K. and Australia appeared to be looking to Canada for leadership.The Governor of the Bank of England had stated that last year he had expected that Mr. Verwoerd could be prevailed upon to make degree of compromise on the apartheid issue. The financial circles of the U.K. had been endeavouring to promote such a compromise but Mr. Verwoerd had been intransigent.

Mr. Diefenbaker said he might ask one of his colleagues to join him in the U.K. for one or two days during the Conference.He proposed first to ascertain informally whether the order of speaking at the Conference might be changed. If not, as second speaker he would strongly condemn apartheid, would refer to the changes in the Commonwealth and in the world situation since last May, and would propose that the issue of readmission be postponed. If Mr. Verwoerd should then leave the Conference, should Canada modify its position?All the major Canadian newspapers were now urging that South Africa be dropped from the Commonwealth if its racial policy was not modified.

During the discussion the points raised in previous discussions were further explored, and in addition the following points were raised:

Most Ministers said that Mr. Diefenbaker should speak in the usual order at the Conference, and should not evade the opportunity to give leadership to the other members. Other Ministers said that an effort should be made to have the order reversed, but that the Prime Minister should not place himself in the position of asking formally for a change and being refused. Some Ministers said that Canada should seek a reversal in the order of speaking only if the non-white members were unanimous in the view that South Africa should be re-admitted.

Most Ministers said the apartheid policy should be strongly condemned. Some Ministers said that apartheid should be regarded as a domestic matter, and that Canada should not interfere.

Despite the doctrine of Cabinet solidarity, it was probably undesirable in this instance for the Prime Minister to be accompanied at the Conference by any Minister whose personal convictions on the South African question were markedly different from those of the Cabinet as a whole.

Most Ministers said that Mr. Diefenbaker should try to have the question of South African readmission postponed to a later Conference. Some Ministers however said that he should not seek postponement nor vote to refuse readmission.

There might be special significance in the fact that Her Majesty the Queen was giving an audience to Mr. Diefenbaker before any of the other Prime Ministers. The U.K. Secretary of State for Commonwealth relations, Mr. Sandys, had recently made the extraordinary assertion that South Africa would be readmitted to the Commonwealth unless all other members were unanimously in favour of rejection.

The Cabinet reaffirmed the decision taken at its meeting of February 25th that the Prime Minister should be authorized to use his own best judgment in determining, in the light of the tactical situation that might develop at the forthcoming Commonwealth Prime Ministers’ Conference, and consistently with the general tenor of the discussions in the Cabinet, the position he should take in discussing the South African question at the Conference.. . .

473. DEA/11827-40

Memorandum by Special Assistant to Secretary of State for External Affairs

[Ottawa], March 7, 1961

South Africa

After seeing Mr. Macmillan at lunch on March 7th, the Prime Minister said that he had suggested that the difficulties over the South African item might be greatly diminished if the normal order of speaking were reversed. Mr. Macmillan had seemed very interested in this idea and had said that it could be the salvation of the conference.

H.B. R[OBINSON]

474. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], March 9, 1961

Present

The Secretary of State for External Affairs and Acting Prime Minister (Mr. Green) in the Chair,

The Minister of Finance (Mr. Fleming),

The Minister of Trade and Commerce (Mr. Hees),

The Minister of Transport (Mr. Balcer),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of National Defence (Mr. Harkness),

The Minister of Citizenship and Immigration (Mrs. Fairclough),

The Minister of Fisheries (Mr. MacLean),

The Minister of Labour (Mr. Starr),

The Postmaster General (Mr. William Hamilton),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of National Health and Welfare (Mr. Monteith),

The Minister of Defence Production (Mr. O’Hurley),

The Associate Minister of National Defence (Mr. Sévigny),

The Minister of Forestry (Mr. Flemming),

The Minister without Portfolio (Mr. Halpenny).

The Assistant Secretary to the Cabinet (Dr. Hodgson),

Mr. D.F. Wall, Privy Council Office.…

Commonwealth Prime Ministers’ Conference; Canadian Policy on South Africa

(Previous reference March 2)

The Acting Prime Minister said that on the previous day he had spoken with the Prime Minister who had asked that the question of South Africa be discussed again by the Cabinet. Mr. Diefenbaker had stated that the general atmosphere among the delegates favoured re-admission of South Africa to the Commonwealth. He was therefore considering the desirability of taking a less aggressive position than that previously discussed with the Cabinet, and of proposing that the members of the Commonwealth should try to frame a declaration of principles or rights.

Mr. Green said the Canadian newspaper were predicting that South Africa would be re-admitted, and some newspapers were already criticizing the Prime Minister on the assumption that he would agree.

During the discussion the following points were raised:

The appropriate course for Canada to follow in the discussion was largely dependent upon the tactical situation from time to time. The Cabinet should therefore avoid making detailed suggestions at this time.

Canada should not vote against re-admission of South Africa if it was clear that all other members would be in favour. On the other hand Canada should give a lead in opposing re-admission if it was clear that some other members would follow such a lead.

The Prime Minister should condemn apartheid clearly and bluntly. If he should fail to do so, it would appear that he had succumbed to the influence of the U.K. Prime Minister.

The Prime Minister should not actively sponsor a proposal that a Commonwealth Declaration of Rights be formulated. The Canadian Bill of Rights was still untested, and an attempt to establish a Bill of Rights for the Commonwealth at this time would probably provoke ridicule in Canada.

The Cabinet agreed that the Acting Prime Minister should inform the Prime Minister that in its view he should firmly and clearly condemn the South African apartheid policy at the Commonwealth Prime Ministers’ Conference, and that having done so he should use his own judgment in determining the position he should take as the discussion developed, and, further, that in its view he should not at this time take the initiative in sponsoring a proposal for the formulation of a Commonwealth Declaration of Rights.. . .

475. DEA/11827-40

Memorandum by Secretary to Cabinet

SECRET [London], March 12, 1961

Indian Attitude on South African Questions

Mr. R.K. Nehru, Secretary-General for External Affairs and the senior Indian official on their delegation, finally reached me by telephone about 5.30 on Saturday afternoon and said that his Prime Minister had asked him to see me on a matter relating to the Conference. I arranged for him to come here almost immediately to speak about it.When I met Mr. Nehru, he informed me that he wanted to tell us of their attitude on the South African question. He said that his Prime Minister had been careful not to make any public statements on this during the preceding week and they had been giving a good deal of thought to the subject both before leaving India and here in London. Now they were ready to inform the other delegations confidentially of their views in anticipation of the discussion next week.At this point I saw the importance of Mr. R.K. Nehru’s message and suggested that he might like to come in and give it directly to Mr. Diefenbaker, so that the latter could ask any questions about it that occurred to him. This was quickly arranged and Mr. Nehru resumed his account with Mr. Diefenbaker, repeating two or three of the earlier points.There were four principal considerations in their attitude on this question. They were as follows:

They must not make or appear to make any compromise on the subject of racialism. What they did in regard to South Africa must be consistent with what they have said and done on racialism in the past.

If they took any positive action which could be interpreted as approval of South Africa, they would be letting down and weakening the progressive forces in Africa, which they had been supporting heretofore, and which were relying on their understanding and support in their struggle for the establishment of successful independent nations in Africa.

If they took any positive action that appeared to constitute approval or support of South Africa, this would expose them and other western and neutral members of the Commonwealth to serious criticism and undermining by the Communists, including particularly Communist China which was already attacking India.

The granting of consent by other members to South Africa continuing in the Commonwealth would weaken the value and usefulness of the Commonwealth in future, whereas on the other hand the Commonwealth could be strengthened and made more useful if South Africa should drop out.At this point Mr. Nehru referred to the editorial in the latest issue of the Economist on Commonwealth affairs and said that this contained thoughts along the same lines that they had in mind. Mr. Diefenbaker noted that he had not always been able to agree with the ideas of the Economist but that he would look at the article. (It is presumably the article entitled “Bridge Club.”)Footnote 13 After outlining these arguments, Mr. R.K. Nehru then said that if a positive act of consent or its equivalent were needed in order to retain South Africa in the Commonwealth, India would have to take a decision in accordance with the above principles. I felt Mr. Nehru made it quite clear in the context that this would mean India refusing to consent if the issue became a direct one. Later, as he was leaving, I asked Mr. Nehru whether it was not his belief that positive consent by all members was required and he said that they felt last year’s communiqué indicated this quite clearly. (This appears to be contrary to the understanding and the plan which the United Kingdom appear to have in mind.)Mr. Diefenbaker asked Mr. Nehru several questions in the course of the latter’s exposition. He then went on to outline the present stage of his own personal thinking on the subject as indicating a possible course of action.He thought it would be quite feasible to say that it was not necessary to take action yet on the South African request to continue as a member of the Commonwealth, despite the precedents that had been established. Their legislation is not yet through their Parliament and it does not go into effect until the end of May. He therefore thought the question of consent to continuing should be left until later and a decision to that effect should be made by the Conference. He thought the Conference should also make a statement in the communiqué condemning apartheid.The result of these two actions, Mr. Diefenbaker suggested, would be that South Africa would withdraw from the meeting and probably from the Commonwealth as well, without direct action having to be taken to exclude her. If she did not withdraw, he thought the Verwoerd government would be apt to be under severe attack at home in the next twelve months and might indeed be defeated over the issue. He said that he had not informed Mr. Macmillan of these particular views when he had seen him during the preceding twenty-four hours at Chequers, but that he was so interested in the views that Mr. R.K. Nehru had set forth that he thought he should tell him the state of his own thinking on the matter at this stage.

R.B. B[RYCE]

476. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], March 14, 1961

Present

The Secretary of State for External Affairs and Acting Prime Minister (Mr. Green) in the Chair,

The Minister of Transport (Mr. Balcer),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of National Defence (Mr. Harkness),

The Minister of Citizenship and Immigration (Mrs. Fairclough),

The Minister of Fisheries (Mr. MacLean),

The Minister of Labour (Mr. Starr),

The Postmaster General (Mr. William Hamilton),

The Solicitor General (Mr. Browne),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of National Health and Welfare (Mr. Monteith),

The Minister of Defence Production (Mr. O’Hurley),

The Minister of Public Works (Mr. Walker),

The Associate Minister of National Defence (Mr. Sévigny),

The Minister of Forestry (Mr. Flemming),

The Minister of Northern Affairs and National Resources (Mr. Dinsdale),

The Minister without Portfolio (Mr. Halpenny).

The Assistant Secretary to the Cabinet (Dr. Hodgson),

Mr. D.F. Wall, Privy Council Office.

Commonwealth Prime Ministers’ Conference; South Africa

(Previous reference Mar. 9)

The Acting Prime Minister said that on this day he had again spoken with the Prime Minister. Mr. Diefenbaker had hoped that the Conference might agree to the readmission of South Africa but also to a simultaneous declaration of principles of the Commonwealth fraternity. The Australian Prime Minister had refused to agree to any declaration on South Africa.

Mr. Green said that Mr. Diefenbaker had taken the lead in condemning the apartheid policy, and had been supported by the African and Asian members. Australia and New Zealand had followed the United Kingdom in urging readmission.The Cabinet should consider whether any further suggestions should be given to Mr. Diefenbaker at this time.

During the discussion the following points were raised:

Some Ministers said South Africa should be readmitted to the Commonwealth. A refusal to admit that country would be damaging to the solidarity of the Commonwealth.

Other Ministers said that readmittance of South Africa would probably lead to the eventual withdrawal of all non-white member countries from the Commonwealth. They were entitled to be treated as equals. Mr. Nyerere of Tanganyika had written recently that, if South Africa was retained in the Commonwealth, Tanganyika would not seek membership.

The Prime Minister, as a participant in the discussions, could best judge the course he should follow from time to time on the subject.

The Cabinet noted the statement of the Acting Prime Minister on the progress of discussions at the Commonwealth Prime Ministers’ Conference in London.. . .

477. DEA/50085-J-40

Delegation to Prime Ministers’ Meeting to Secretary of State for External Affairs

The situation tonight after further meetings throughout the day is that South Africa has been confronted with the proposition that its membership would probably be continued if it would accept the making of a declaration by the other members condemning apartheid in severe terms and stating that the principle of non-discrimination in respect of race and colour is basic to the multi-racial Commonwealth. South Africa would not repeat not be asked to subscribe to such a declaration but is in effect faced with the dilemma of remaining a member of a Commonwealth in which all the other members had collectively made such a statement as representing the official view of the Commonwealth. Dr. Verwoerd finds this very difficult to accept and at the end of the meeting this evening expressed a wish to consider his position overnight. It will thus be up to South Africa to decide whether or not repeat not to remain as a member under these conditions.

478. DEA/50085-J-40

Delegation to Prime Ministers’ Meeting to Secretary of State for External Affairs

This morning Dr. Verwoerd agreed to formula outlined in our reference telegram, i.e. that it would remain as a member of Commonwealth but that a declaration would be issued by the other ten members condemning apartheid and stating that non discrimination was a principle of Commonwealth association.

The exact wording of the relevant statements is not repeat not yet available to us but a communiqué is expected shortly and the text will be forwarded without delay.

479. DEA/50085-J-40

High Commissioner in United Kingdom to Prime Minister’s Office

TELEGRAM 1042 London, March 17, 1961CONFIDENTIAL. OPIMMEDIATE.

For Information: Prime Minister and H.B. Robinson from Bryce.Officials met last night as usual to go over first draft of communiqué produced by Secretary of meeting. It was modified in a number of particulars and a second draft prepared for meeting this morning.

The draft communiqué itself contains all thirteen paragraphs and there is an annex on disarmament in almost exactly the form which Robinson took with him with the possible addition of a short paragraph following paragraph 7 on the importance of safeguards to prevent the diversion of fissionable material etc. to military use. It seems unlikely that additional paragraph will be finally included as India appears to be stoutly opposed to it.

In main communiqué first two paragraphs are routine. The third relates to Congo and the fourth briefly to Laos. The fifth relates to disarmament and refers to annex. There may be some dispute over how much should be said about disarmament. The sixth relates to nuclear test; the seventh to the structure of UN. Paragraphs 8, 9, 10 and 11 are routine concerning Cyprus, Sierra Leone and Western Samoa. Paragraphs 12 and 13 constitute a quiet procedural history of South African issue with no repeat no argument.

In accordance with Prime Minister’s desire I suggested that the following sentence should be included in the final paragraph “The Commonwealth Prime Ministers affirmed their belief that for all Commonwealth governments it should be an objective of policy to build in their countries a structure of society which offers equality of opportunity for all irrespective of race colour or creed.” I got no repeat no support for the inclusion of this sentence which was said to be out of keeping with the non-controversial paragraphs proposed at this stage on South African representative definitely opposed it and Australian representative told me he thought Menzies would oppose it if it were raised today. I said it was probable that Mr. Drew would raise it on behalf of Canada at the meeting this morning. Since inclusion of material in communiqué traditionally requires unanimous agreement it seems unlikely we can succeed in having this declaratory sentence included.

Arrangements are being made to telegraph final communiqué and annex as approved en clair immediately we receive it. It is not repeat not certain that the timetable will be quick enough to get it to you in form for tabling before House opens it Ottawa but we shall use our best endeavours to do so.

480. DEA/50085-J-40

High Commissioner in South Africa to Secretary of State for External Affairs

TELEGRAM 32 Capetown, March 17, 1961SECRET. OPIMMEDIATE.

South African Withdrawal from Commonwealth

Local press March 16 carried London story quoting UK source on events at Prime Ministers’ Conference on last afternoon of discussion on South African question. According to this account agreement was so close that it required Dr. Verwoerd to concede only a fraction an inch.Footnote 14 We understand from UK High Commissioner’s Office that UK source of this article was Mr. Sandys.

When Verwoerd returns here March 20 he will undoubtedly continue pose of injured innocence which he has already assumed in his public statements last two days. From a local point of view it will be almost impossible for parliamentary opposition to argue against Verwoerd’s action if he is allowed to continue to say he was forced out. His interpretation of what went on in London (for example “Canadian-African-Asian bloc”) will also have a direct bearing on Canada’s name in South Africa. We wonder therefore whether Sandys account of events of last afternoon is correct and if so whether it should not repeat not be more widely and officially published in order to reduce damage to Canada’s name which Verwoerd will do among White South Africa generally and also in order to increase effectiveness of opposition attack on him.

[JAMES J.] HURLEY

481. DEA/50085-J-40

High Commissioner in United Kingdom to Prime Minister

TELEGRAM 1044 London, March 17, 1961

UNCLASSIFIED. EMERGENCY.

(For immediate delivery on arrival)

South Africa’s Withdrawal

In statement last night Verwoerd quoted from draft communiqué of March 15 which he said he had been prepared to sign. I therefore suggest the advisability of reading into the record in the House this morning exact wording of draft communiqué of March 15 beginning “At their meetings this week the Commonwealth Prime Ministers have discussed questions affecting South Africa. Exact quotations are as follows:

“Other Prime Ministers strongly criticized and deplored the racial policy of the Union Government, which appeared to them to involve a substantial measure of racial discrimination. They stressed the anxiety they felt it was giving rise to in the hearts of millions of people throughout the world.”

“After hearing Dr. Verwoerd’s statement, the other Prime Ministers adhered to the views they had expressed regarding the racial policy of the Union Government, and reaffirmed their belief in equality of opportunity for all, irrespective of race, colour or creed.”Verwoerd also refers to Afro-Asian-Canadian bloc.Footnote 16

[GEORGE] DREW

482. DEA/50085-J-40

Memorandum from Special Assistant to Secretary of State for External Affairs to Commonwealth Division

[Ottawa], March 22, 1961

I attach copies of each of three successive drafts which served as the basis for discussion on South Africa at the Prime Ministers’ Meeting in London. I received these drafts today from the Prime Minister. I do not believe that any other copies were distributed except to Mr. Fulton, who accompanied the Prime Minister to the meetings on the South African item.

My understanding is that the first draft was the basis of discussion on Monday, March 13, the second draft on Tuesday, March 14 and the third draft was prepared between the morning and afternoon sessions on March 15.

The markings on the third draft are based on Mr. Fulton’s notations. I take it from the “OK” on the first page that this paragraph was generally acceptable. The underlining on the second page of the words “and with the Charter of the United Nations” reflects Mr. Diefenbaker’s wish to have this phrase included. I am not able to throw any light on the exact circumstances which led to Dr. Verwoerd’s decision to withdraw his application for consent but there is an obvious contradiction between the insistence of the majority on “basic ideals” for the Commonwealth and on the statement on page 3 (Dr. Verwoerd’s section) in which it is stated that no basic ideals for the Commonwealth had been formulated or deemed desirable. From remarks made by Mr. Fulton after the South Africans had made their decision known, I believe that this was the breaking point.

I assume that you will be circulating this material on a need-to-know basis.

H.B. R[OBINSON]

[ENCLOSURE 1]

Memorandum of Meeting of Commonwealth Prime Ministers

SECRET [London], March 13, 1961

First Draft of Paragraphs for Communiqué

The Commonwealth Prime Ministers also discussed constitutional questions relating to Commonwealth membership.The Prime Ministers accepted a request from the Republic of Cyprus for admission to membership of the Commonwealth and invited the President of the Republic to join their Meeting. The Prime Ministers also took note of the forthcoming constitutional changes in the Union of South Africa. They were informed that, following the plebiscite in October, 1960, the appropriate constitutional steps were now being taken to introduce a republican form of constitution in the Union. They were also informed that it was the desire of the Union Government that South Africa should remain within the Commonwealth as a republic. The Prime Ministers, recalling their decision last year that a change from a monarchical to a republican form of government is an internal matter solely for decision by the country concerned, and recalling that India, Pakistan and Ghana were confirmed as members of the Commonwealth when they adopted republican constitutions, agreed that, following these precedents, south Africa was likewise entitled to remain a member of the Commonwealth after becoming a republic on 31st May, 1961.The other Prime Ministers, however, made it plain to the Prime Minister of South Africa that they were unable to separate the purely procedural question from the policies of racial discrimination which are being pursued by the present Government of the Union. A full discussion was held, in the course of which the Prime Minister of South Africa explained the racial policies of the Union Government. The other Prime Ministers expressed deep concern about the impact of such policies on the relations between member countries of the Commonwealth, which is itself a multi-racial association of peoples. Accordingly they declared that such policies were inconsistent with the basic ideals on which the unity and influence of the Commonwealth rest.

[ENCLOSURE 2]

Communiqué of Meeting of Commonwealth Prime Ministers

Revised Draft of Passage on South Africa’s Racial Policy

The Prime Ministers discussed the racial policy of the Government of the Union of South Africa.It is an established convention that at these Meetings matters falling within the internal jurisdiction of a member country are not discussed without the consent of that country. It was generally felt however that the policy of apartheid had aroused widespread anxiety throughout the world and had now acquired an international significance which made it more than a matter of domestic concern to the Union Government. On this occasion the Prime Minister of South Africa agreed to participate in a discussion of the racial policy of the Union Government.A full discussion was held, in the course of which Dr. Verwoerd explained the policy of the Union Government, which he described as one of separate development. The other Prime Ministers, for their part, strongly criticised and deplored this policy, which appeared to them to involve a substantial measure of racial discrimination. They stressed the anxiety to which it gave rise in the hearts and minds of millions of people throughout the world, and expressed their deep concern about the impact which it must have, unless modified, on the relations between the member countries of the Commonwealth and on the cohesion of the Commonwealth itself as a multi-racial association.They considered that this policy was inconsistent with the basic ideals on which the unity and influence of the Commonwealth rest, and with the Charter of the United Nations. They affirmed their belief that, for all Commonwealth Governments, it should be an objective of policy to build in their countries a structure of society which offers equality of opportunity for all, irrespective of race, colour or creed.

[ENCLOSURE 3]

Projet de communiqué, le 15 mars 1961

Draft communiqué, March 15, 1961

At their meetings this week the Commonwealth Prime Ministers have discussed questions affecting South Africa.The Constitutional Question

The Prime Minister of South Africa informed the Meeting that, following the plebiscite in October, 1960, the appropriate constitutional steps were now being taken to introduce a republican form of constitution in the Union. He also stated that it was the desire of the Union Government that South Africa should remain within the Commonwealth as a republic. The Prime Ministers recalled their decision of last year that a change from a monarchical to a republican form of government is an internal matter solely for decision by the country concerned, and recalled that India, Pakistan and Ghana were confirmed as members of the Commonwealth when they adopted republican constitutions. They agreed that, following these precedents, this constitutional change was no bar to South Africa’s remaining a member of the Commonwealth after becoming a republic on 31st May, 1961.Footnote 17The Racial Question

The Prime Ministers also discussed the racial policy followed by the Union Government. It is an established convention that at these Meetings matters falling within the internal jurisdiction of a member country are not discussed without the consent of that country. On this occasion, however, the Prime Minister of South Africa agreed to a discussion of the racial policy of the Union Government.In the course of a full discussion the other Prime Ministers strongly criticised and deplored the racial policy of the Union Government, which appeared to them to involve a substantial measure of racial discrimination. They stressed the anxiety to which, they felt, it was giving rise in the hearts and minds of millions of people throughout the world, and expressed their deep concern about its impact on the relations between the member countries of the Commonwealth and on the cohesion of the Commonwealth itself as a multi-racial association. They considered that this policy was inconsistent with the basic ideals on which the unity and influence of the Commonwealth rest, (and with the Charter of the United Nations). The other Prime Ministers affirmed their belief that, for all Commonwealth Governments, it should be an objective of policy to build in their countries a structure of society which offers equality of opportunity for all, irrespective of race, colour or creed.Footnote 18The Prime Minister of South Africa stressed the positive aspects of the Union Government’s policy of separate development and deplored the accusations of racial discrimination levelled against South Africa by member countries which he considered to be themselves guilty of such practices. He expressed the view that the development of proper relations between members of the Commonwealth could only be impaired if they attempted to interfere in one another’s domestic affairs instead of concentrating on cooperation in matters of common concern. No basic ideals for the Commonwealth had been formulated or deemed desirable; and such a formulation might raise difficulties for many members. (Nor was he prepared to accept that the Charter of the United Nations should be invoked when dealing with Commonwealth affairs.) He stated his conviction that in South Africa the policy of separate development remains the only way of ensuring full opportunities for all, irrespective of race, colour or creed, whereas any form of integrated society would become a source of strife or injustice to one or other population group and should not be an objective of policy.After hearing Dr. Verwoerd’s statement the other Prime Ministers adhered to the views they had expressed regarding the racial policy of the Union Government and its effects.Footnote 19

483. J.G.D./MG01/XII/B/122 (vol. 34)

Memorandum by Prime Minister

CONFIDENTIAL [Ottawa], June 5, 1961

Telephone Conversation with Hon. George Drew in London

This morning I called the Honourable George Drew in connection with Prime Minister Macmillan’s message to me that Mr. Sandys might visit Canada late in June to discuss with the Government the implication to the Commonwealth and in particular to Canadian trade with United Kingdom joining European Trading Bloc.Footnote 20I also informed him that the message from Prime Minister Macmillan was marked “Secret and Personal” and yet a copy was given to the Departmental officials even before I saw it. I said I would not raise any complaint about this but it made impossible personal communication. He said that in his opinion it was never intended that such a communication should have copies delivered to the Department of External Affairs.Stated that while Mr. Sandys most reliable in connection with South Africa’s application for readmission to the Commonwealth that it was apparent that Mr. Sandys had not given the proper picture as to the feeling of the Commonwealth countries to Mr. Macmillan before the Prime Ministers’ meeting took place.

J.G. D[IEFENBAKER]

Part 2

Economic Relations Between the United Kingdom and Europe

484. D.M.F./Vol. 137

Memorandum from Assistant Deputy Minister of Finance, to Minister of Finance

SECRET [Ottawa], May 17, 1961

UK and “the Six” – Pm to Pm Message

I attach a copy of a PM to PM message on the subject of UK and the Six. The original was given to Basil Robinson this morning but I do not know whether it has reached the Prime Minister. I received this copy from McGregor. He has also given a copy to Ritchie. He could not give a copy to Trade and Commerce because, to use his own words, “there is no one of significance there to-day; they are all in the West.” I asked McGregor whether similar messages had gone to other Commonwealth Prime Ministers. He said that similar messages had gone to the “old Commonwealth,” i.e. Australia and New Zealand.

Grandy and I have read the message very carefully. We can find nothing in it to suggest that the position of the UK is different from what we believe it to be and have believed it to be for the past few months. As we understand the message, it gives an undertaking that the UK will consult us again before they start on “negotiations” with the Six. There is nothing to suggest that at the meeting of Commonwealth Officials next week there will be much added to what we already know about the UK position.

The receipt of this message may add some further stimulus, justified or unjustified, to those in Ottawa who believe that the Canadian Government should adopt a new posture towards UK adherence to the Six.Footnote 21

A.F.W. P[LUMPTRE]

[ENCLOSURE]

Message from Prime Minister of United Kingdom to Prime Minister

SECRET Ottawa, May 17, 1961

When I was in Ottawa we had very good talks about the problem of the Six and the Seven.Since then there has been a good deal of speculation in this country about the possibility of the United Kingdom joining the European Economic Community – the Six – and I thought I ought to let you know exactly where matters stand.I need not go again into the background or explain the political dangers which I see unless some arrangement can be made to heal the present economic divisions in Europe. I believe that this is in the real interests not only of Europe but of the whole free world and especially of the Commonwealth. But it is only on the basis of that belief that we could enter or create a larger European community. Of course all this will depend on the progress which we can get. When we have a better idea about this we shall all have to weigh up together our estimate of the balance of future strength in the world.We are now engaged in looking at an examining the implications if Britain and such of the other countries at present in the European Free Trade Area as wish to do so were to join together with the Six. What we have to decide is whether the prospects of reaching an acceptable result would make it worthwhile to embark on further negotiations. Of course it is absurd to suggest that we could just join the Treaty of Rome as it stands. We would have first to have special arrangements to take care of the Commonwealth interest and of our British agricultural position. We would also need to ensure that satisfactory arrangements were made for those of our partners in E.F.T.A. who could not follow us into the E.E.C. This would mean quite a substantial change for the Six and up to now I will say quite frankly that I have not felt there was sufficient disposition on the part of the Six to meet these special needs. What I particularly did not wish to do was to embark upon a negotiation with all these risks without the likelihood of a successful outcome.We have still not been able to make a complete assessment of the situation although some of our informal discussions have got us on a little further. When we have finished our own examination here in the United Kingdom and before we reach any decision I will consult you again. At that stage we shall have to consider how best our consultation can be made most effective. Meanwhile our Senior Economic Officials are meeting in a few days’ time. At that meeting we shall tell you in full about our recent discussions with European officials, but I thought I would like to send you this message now to let you know the outline of how things stand.As I write this it seems as though the Geneva Conference on Laos is to get under way at last. We have had some doubtful moments but I still believe that in the present not very satisfactory circumstances there is no acceptable alternative but to go for a neutral Laos. On the whole I feel that the Russians are really anxious to keep things quiet and at least do not want the Chinese to get too much benefit.I would like you to know how grateful we are for the good work your people have done in the I.C.C. Its balanced and timely announcement about the cease-fire was invaluable. So is its continued work of observation in Laos.

485. DEA/12447-40

Message from Prime Minister of United Kingdom to Prime Minister

SECRET & PERSONAL Ottawa, May 31, 1961

Europe and the Commonwealth

I sent you a message on the 16th May about the progress of our work on the problem of the association of the United Kingdom with the Six. You will be getting reports from your representatives† about the very useful discussion that the Senior Economic Officials had on this subject on the 25th May.I attach the greatest importance, as I know you do, to our having the fullest and most effective consultation about this vital matter before my Government has to decide our course of action and I have been giving some thought about how this can best be done. There seems to be at the moment a more favourable climate of opinion on the Continent on this issue than there has been for some time. But this could easily change. We feel therefore that if we are to enter into negotiations there is advantage in doing so sooner, rather than later. At the same time it would not be in the interests of any of us to enter into negotiations which were likely to break down at the outset. It is therefore necessary not merely to assess the advantages and disadvantages to us all, but also to have in mind what might be a likely basis for agreement. This involves very great political and economic considerations, both general and specific. We are of course examining closely the consequences for our own agriculture and the broader social implications of an association with the European Economic Community, as well as the implications we see for the Commonwealth. But we shall need your views on the political and economic problems involved. While consultation between our Governments can and will continue to take place through normal official channels, I feel that we shall reach the stage within a matter of weeks when there should be more direct and personal discussion between Ministers.What I have in mind, therefore, is that Duncan Sandys should visit you to discuss with you the advantages and disadvantages of our associating ourselves closer with Europe and the possible terms on which this might be acceptable to us and other Members of the Commonwealth. He would be able to explain to you at first hand just how we see this problem in its wider political aspects as well as in its economic setting.I thought you would like to know at once how I propose that this matter should be handled. I hope that you would agree that there need be no announcement about this arrangement until we can work out the timing for the visit, and that these plans can be kept confidential until then.

486. DEA/12447-40

Memorandum from Under-Secretary of State for External Affairs to Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], June 1, 1961

Uk and Europe: Sandys’ Visit

If the Prime Minister raises this matter in Cabinet this morning, you may wish to suggest that the reply to Prime Minister Macmillan’s message should be on the following lines:

We recognize the important issues referred to by Mr. Macmillan;

We would naturally welcome an opportunity to discuss these matters with Mr. Sandys;

Since many elements are still extremely vague, it is difficult at this stage to assess “the political and economic problems involved;”

We would hope that before Mr. Sandys’ visit the UK Government would be able to indicate more precisely the kind of solution to the problem of their relationship with Europe which they would find acceptable;Footnote 22

Perhaps conversations with Mr. Sandys could best take place after the meeting of the Senior Officials of the two countries (UK-Canada Continuing Committee on Trade and Economic Affairs) which is scheduled to take place around the end of June, if the UK Government would be in a position at that time to give a clearer indication of the kind of arrangements which they are contemplating.

A.E. R[ITCHIE]for Under-Secretary of Statefor External Affairs

487. DEA/12447-40

Memorandum from Special Assistant, Office of Secretary of State for External Affairs, to Assistant Under-Secretary of State for External Affairs

The Sandys’ visit was not discussed in Cabinet yesterday, but the Minister did take up with the Prime Minister personally your suggestions as to the nature of the reply which should be sent to Mr. Macmillan’s message of May 31.

Of the two approximate dates on which Sandys would like to come, the Prime Minister would prefer the later – June 26.

The Prime Minister did not comment on suggestions (a), (b), (c) and (e) in your memorandum under reference, but in respect of (d), you will see that he has written in the margin “We want specifics before S. comes.” The Minister explained that the Prime Minister is not anxious to talk to Sandys unless he is in a position to state clearly and in detail what the United Kingdom Government’s position is with respect to their relationship with Europe. The Minister added that language such as “we would hope” is not sufficiently categorical. It should be made clear in the reply that the Prime Minister would expect the United Kingdom to be in a position to discuss specific proposals so that their effect on Canada’s trading position can be clearly determined.

Personal message from Mr. Macmillan does indicate extent of the pressure which is being exerted from different quarters to persuade the UK Government to take some action on this subject.

Macmillan does emphasize that there will be consultation before UK enters into negotiations, but I suggest for your consideration that this subject may be sufficiently important to send Minister of Finance and Minister of Trade and Commerce to London, as this problem, subject to your directions, would fall particularly within their fields of responsibility.

I confess I am unable to understand the suggestion that Duncan Sandys visit Ottawa. He has attended none repeat none of the meetings connected with the discussion of these problems, nor can I recall that his ministerial duties have at any time been associated with subjects of this nature. On the basis of our experience here I would be inclined to think that you would get little satisfactory information from him. In fact if a minister is to go to Canada to deal with this subject, I would have thought that it should have been either Maudling or Lloyd, having regard to the fact that from the point of view of trade Canada is much the most important member of the Commonwealth next to the UK. If your decision were that it would be best to have either one or both of the ministers I have mentioned come to London to discuss different aspects of this subject with the ministers of the UK Government directly concerned, then without any apparent rebuff it would dispose of the suggestion that Sandys go to Canada and would certainly obtain much more useful information. I have in mind that it would also have the advantage of providing two stages for the discussion of this subject because the ministers could then report to you and there would be ample opportunity to have our own officials who are now working on this subject consider the suggestions which have been made before you were called upon to express an opinion.

In trying to understand the reason for the very active campaign by British manufacturers which has now taken a clear form, I would not repeat not discount the possibility that the sale of weapons and aircraft may be one of the motives. I find it difficult to believe that the British are going to sell in Europe many automobiles, electrical products or things of that kind, which are better designed and produced at lower prices in Germany, France and Italy. There is, however, a determined effort, well reported in the press, to sell various types of arms, fighter aircraft and commercial aircraft with a military potential. In that field I think the British are well ahead of the whole of Europe including Germany.

In a speech to the Western European Union yesterday Harold Watkinson made an extremely significant statement reported in the following words in today’s Daily Express “Britain, with her German and French Allies, had recently made important and encouraging progress in the sharing of research and production. ‘We believe’ said Mr. Watkinson ‘that success in this field is absolutely essential to our being able to meet our commitments as a whole and we are willing to face the sharing of risks and sovereignty that must be an essential part of the operation’.”

I am sending the whole of this speech as reported to the Minister for External Affairs,† but the part I have quoted refers to “sharing of risks and sovereignty.” This statement may be sufficiently important to justify a direct question to Mr. Macmillan as to what sharing of sovereignty they are contemplating. The speech does suggest to me the possibility that the sale of arms and aircraft, which could account for a very large export, may have something to do with the thinking of the government indicated by Mr. Macmillan’s telegram to you.

[GEORGE] DREW

489. DEA/12447-40

Message from Prime Minister to Prime Minister of United Kingdom

SECRET [Ottawa], June 3, 1961

European Common Market

I have given careful attention to your messages of May 16 and May 31 about the United Kingdom and the Common Market.The importance to Canada of the major political and economic problems presented by the possible association of the United Kingdom with the European Economic Community underlines the need, which you recognize in your message, for even closer and more effective consultation before any final decision is reached.I have noted your suggestion that Mr. Sandys should come to Ottawa to discuss further the advantages and disadvantages of United Kingdom association with Europe and the possible terms on which this might be acceptable. I would emphasize, however, that if discussions are to lead to the effective consultation which both of us desire, we should be supplied in advance with a fairly specific indication of the nature of the arrangements which you might contemplate as a basis for negotiations with Europe.

Following is text of report by Richardson and Renouf (Australian Embassy) on their talks yesterday with Brunet, Chargé of French Mission to EEC.“Brunet gave the following as French Government’s attitude towards UK’s membership of the Common Market which had just been conveyed to the rest of the Six and to the Commission and UK had been informed (a) there should be a Common External Tariff, i.e. the same tariff (and not repeat not simply a harmonised tariff) for EEC and UK. (b) This common tariff should conform with GATT. (c) If UK entered EEC, subsequent modifications in her relations under EFTA should be subject to discussion with EEC. (d) UK’s membership of EFTA would not repeat not be compatible with membership of EEC. (e) Agriculture. There should be common prices at levels which would give a fair return to producers while not repeat not causing abnormal surpluses. There should also be a joint scheme to finance the export disposal of any surpluses resulting from increased productivity which has to be assumed.Variable levies should be applied by UK.Brunet, in speaking, had in his hands a copy of the actual document setting out French attitude but his oral summary was obviously much shorter than the written text.Brunet explained that point (b) would mean that the common EEC-UK tariff would take into account UK tariff levels. However, he commented that resultant tariff should not repeat not be much different to the present EEC Common External Tariff. On point (e), he said that French did not repeat not want German prices “nor did they want Australian prices.” They thought that present French prices were about right.Brunet said that UK would find French terms “tough.” He said that Wormser doubted very much whether UK would take the plunge once it had realized all the implications of EEC membership (according to Tabor (Danish counsellor), de Gaulle recently told Danish Foreign Minister that he was “unenthusiastic” about UK membership of EEC).Brunet offered no repeat not suggestions as to how Commonwealth difficulties could be solved. He claimed that French thinking had not repeat not yet reached this point. He left us to infer that French would not repeat not from their side take initiative in looking at ways of meeting Commonwealth problems.Asked about the attitude of USA, Brunet understood that USA would not repeat not want UK to have an easy entry into Common Market. Our interpretation of Brunet’s remarks about USA attitude is that USA would not repeat not want UK to enter in ways which would seriously water down Rome Treaty. In fact, Brunet expected USA attitude to be helpful to French in limiting the extent of derogations sought by UK.Brunet also said that French did not repeat not yet have a position about where negotiations with UK (if they eventuated) would be held or about what role, if any, the Commission should have in them. Personally, he thought the Commission would have to have some role but UK would not repeat not want the Commission to participate at all. He dismissed idea of negotiations in OECD. Brunet referred, more than once, to how complex negotiations over the UK’s membership would be. There were likely to be simultaneous negotiations with some other EFTA countries, such as Denmark and Norway. He did not repeat not allude to question of role of Commonwealth countries in any negotiations but enquired in passing if Australia had thought of an association with EEC. We did not repeat not react to this beyond commenting that “association” was a vague concept and only had meaning when one knew what were the rights and obligations involved.Please protect Brunet as source of above.”

The Prime Minister said that the Canadian High Commissioner in London had telephoned him to discuss recent developments affecting the possible entry of the United Kingdom into the European Common Market. On June 7th, a representative of the government of France had stated that it would not support the admission of the U.K. except on the terms of the Treaty of Rome, with no derogations from it. Italy was likely to take the same position. Entry on this basis would involve a complete surrender of the previous negotiating position of the United Kingdom. Prime Minister Macmillan was seeking an early decision in the matter. Lord Beaverbrook had expressed the opinion that unconditional acceptance of the Treaty of Rome by the U.K. would mean the end of the Commonwealth, and that Lord Amory had been selected as High Commissioner to Canada because he might be able to “sell” Canada on the U.K.’s entry into the Common Market.He had received a letter a week ago from Prime Minister Macmillan proposing that Rt. Hon. Duncan Sandys, Secretary of State for Commonwealth Relations, should visit Canada to meet with Canadian Ministers on the question. Apparently Mr. Macmillan wished to be able to say that he had consulted the government of Canada. A subject of such great importance to Canada should not be handled in this almost perfunctory manner. A reply had been sent suggesting Mr. Sandys should not come but detailed proposals should be put forward in advance for consideration.He thought the Canadian Ministers particularly concerned should visit London to discuss the subject in greater detail and to report back to the Cabinet. Only after these two steps should the proposed visit of Mr. Sandys be further discussed.

During the discussion the following points were raised:

Prime Minister Macmillan had stated that there would be no consultation with the Commonwealth countries collectively but only with each individually. Obviously he did not wish to face their united opposition.

Some said that President Kennedy might have applied pressure upon the United Kingdom to join the Common Market as a step toward the unification of Europe. In addition, however, it was understood that the U.K. would receive tangible trade benefits including very large orders from European countries for aircraft and munitions if that country joined the Six.

The U.S. administration would probably welcome the end of Commonwealth trade preferences, but the end of the British preference would involve serious losses for Canada. European countries would cease to pay tariff on the entry of agricultural produce to the United Kingdom, and Canada would therefore lose its present trade advantage. In addition, the preference on manufactured products would be lost.

The Canadian government should remind the U.K. government of its promise to consult the members of the Commonwealth, and should urge that a general meeting of Commonwealth representatives be held to discuss the U.K. proposal to join the Common Market.

The Cabinet noted the statement of the Prime Minister on the possible accession of the United Kingdom to the European Common Market and agreed that he should inform the U.K. Prime Minister,

that the government of Canada considered that a general meeting of representatives of Commonwealth countries should be held to discuss the subject before definite action was taken by the U.K.; and,

that, if no such meeting was held, the U.K. should provide the Canadian government as soon as possible with a resume of their proposed course of action, and that, thereafter, the Canadian Ministers particularly affected should proceed to London to discuss the subject in greater detail and to report back to the Cabinet.. . .

Possible Accession of United Kingdom to European Common Market; U.K. Policy on Nuclear Weapons

(Previous reference June 8)

The Prime Minister said that he had telephoned Prime Minister Macmillan earlier that day and had asked why it had been proposed to send Mr. Sandys to visit the Commonwealth countries rather than the Chancellor of the Exchequer or the President of the Board of Trade who were more directly concerned with trade matters. He said he had a high regard for Mr. Sandys, but the latter was not familiar with the issues. He had further stated that this procedure was not conducive to the best working relationships between Commonwealth countries, and that preliminary discussions of Ministers and officials should be held. He had mentioned reports in the U.K. papers expressing opposition to the proposal that the U.K. join the Common Market. He had also referred to a recent despatch from Paris stating that a member of the French government had said that the U.K. would be allowed to join the Six only on the basis of full adherence to the terms of the Treaty of Rome and this would be impossible because of the Commonwealth. Mr. Diefenbaker had expressed the opinion that a meeting of Commonwealth Ministers concerned, if not Prime Ministers, ought to be held on the subject.He had also stated to Mr. Macmillan that, if questioned, he would say that some discussion had taken place on the possible accession of the U.K. to the Common Market, that no decision had been made on further meetings, and that the government of Canada considered that a meeting of Ministers of all Commonwealth countries should be held or even a meeting of Prime Ministers. In reply, Mr. Macmillan had stated that it was difficult to convene meetings of the Commonwealth Prime Ministers at short notice. He seemed to be disturbed on learning Mr. Diefenbaker’s views, but had not given any indication of a change of plans and said he was hoping to get everything in shape.

Mr. Diefenbaker said that a recent speech by Mr. Watkinson, U.K. Minister of Defence, represented the firm decisions of the U.K. government on nuclear weapons. Mr. Watkinson had stated firstly that the U.K. was in favour of a strong deterrent, that the U.S.S.R. should not be encouraged to form any opinion that tactical nuclear weapons would not be used immediately in the event of war, and that N.A.T.O. would be weakened if it relied excessively on conventional weapons. Secondly, Mr. Macmillan had authorized him to state that the U.K. was prepared to face “the sharing of risk and sovereignty” necessary to bring unity in Europe. Thirdly, he had declared that Britain would join with other N.A.T.O. countries in the sharing of defence production. The speech had also included a number of other important points, including an opinion that the banning of nuclear weapons might increase the danger of war, an opinion that Western nations should depend principally upon nuclear weapons until disarmament was achieved, and a declaration that the U.K. would accept the location of tactical nuclear weapons in that country.He had been told by Mr. Macmillan that the U.K. would be able to sell a large amount of aircraft and other military equipment to countries of the Common Market.

The Cabinet noted with approval the statement of the Prime Minister on his telephone conversation with Prime Minister Macmillan on the possible accession of the United Kingdom to the European Common Market, and approved the nature of the reply he proposed to make to an expected question on the subject in the House of Commons.. . .

493. DEA/12447-40

Memorandum by Assistant Under-Secretary of State for External Affairs

CONFIDENTIAL Ottawa, June 10, 1961

U.K. And Europe

Bilateral Versus Collective-Commonwealth Consultations with the U.K.?In direct discussions between Canada and the U.K. we are able to make the most of the special features of our position, which, in their baldest terms, would seem to be:

the important U.K. investment and trading stake in Canada;

the long record of Canadian assistance to the U.K. in times of difficulty;

the value which the U.K. Government places on cooperation with Canada on economic matters generally (bilaterally, in the Fund and GATT, in the OECD, in aid programmes and so on);

the particular value which the U.K. attaches to Canada’s role in the military field and as a NATO ally;

the concern which any U.K. Government must have over the effects which unfair treatment of Canada would have on opinion in countries where Canada is held in some regard (especially in the U.K. itself but also in the United States and elsewhere).

Such special factors as these can be brought to bear in bilateral discussions (or might even be taken into account by the U.K. without our having to stress them). They may, however, tend to get lost or diluted in a general Commonwealth discussion.This would seem to be especially true of consultations on economic questions where not many members share our interests (for example in manufactured goods and temperate-zone products) and where virtually all of the other members are more beholden to the U.K. than we are (because of their greater concentration of trade and other commercial and financial activities in London, because of their membership in the Sterling Area, or because of the heavy reliance of the new countries on the U.K. in the early stages of their independence).It may of course be that any settlement would be more palatable politically in Canada if it emerged from, or was preceded by, a general Commonwealth meeting. It may also be that knowledge of Canada’s stand would convert some members to our views even though their own narrow interests did not point in that direction. It would not seem, however, that with the present balance of interests in the Commonwealth we can count on widespread support for our position. There might, therefore, be some risk in staking our interests too heavily on the rather unpredictable moods of Commonwealth meetings.Whatever Commonwealth discussions are to be held it would seem to be to our advantage from a negotiating point of view to use our bargaining position to the full in bilateral discussions when it is considered that the time has come.

A.E. RITCHIE

494. DEA/12447-40

Memorandum by Assistant Under-Secretary of State for External Affairs

CONFIDENTIAL Ottawa, June 10, 1961

Can Britain Be Kept out of Europe?

IF for political or economic reasons consideration were to be given to the possibility of keeping the U.K. from joining the Six, the questions then would be:

Could we be confident that Britain could in fact be persuaded or prevented from joining?

If so, how could it be done?

If it was not certain that she could be kept out, should the attempt nevertheless be made?

If a strenuous effort at obstruction were made but did not succeed, where would we then be left? Would it be better to have tried and failed than never to have tried at all?* * * * *

In judging the chances of keeping the U.K. from merging with Europe we should try to measure the forces which are operating or which can be mobilized.In the U.K. itself there are powerful forces working for U.K. merger with Europe. These include many U.K. Ministers, considerable parts of the Conservative and Liberal parties (and sections of the Labour Party), most of U.K. officialdom, the major industrial groups, prominent leaders of the Trade Union Congress, much of the Press, a growing number of farm organizations, and various groups of prominent public figures (including the impressive one led by Lord Gladwyn).The vocal opposition within the U.K. includes elements of the Conservative Party, some of leadership of the Labour Party, some of the mining unions and some other parts of the Trade Union movement (concerned about immigrant labour), Empire and Commonwealth groups and parts of the Press associated with them. No doubt some Ministers also have reservations but those are unlikely to be expressed loudly, unless a real crisis in opinion is reached or created.In Europe there are strong forces favouring a U.K. merger. These forces are probably strongest in the Netherlands, Germany, Belgium and Italy, within the Six, and in Norway, Denmark, and perhaps Sweden, among the Seven.The opposing pressures in Europe are probably mainly in France but could develop also in some of the EFTA countries (particularly the neutrals) if it appeared that the U.K. was deserting them and was going in with the Six on terms which left no place for them.Within the Commonwealth the balance of forces is somewhat unpredictable. At the moment it would appear that the forces against union are strongest in Canada, Australia and New Zealand (and Hong Kong). Most of the African and Asian members would appear willing to acquiesce in U.K. membership if something can be done (as seems likely) about cocoa and certain other tropical products and perhaps about increasing the volume of capital available from the New Europe for their economic development.In the United States some official sympathy has been expressed with the idea of U.K. political union with Europe. Opposition could, however, develop if it appeared that U.S. agricultural and commercial interests would suffer severely or if it seemed that U.K. membership would produce a “Third Force” in Europe on whose cooperation the U.S. could not depend.* * * * *In the light of this apparent alignment of forces it would seem clear that an all-out effort to stop a U.K. move into Europe would involve mobilizing most or all of the potential opposition in the U.K. itself, in the Commonwealth, in Europe, and in the United States. A half-hearted attempt (confined, for example, to the U.K. and perhaps the Commonwealth) might well not produce sufficient resistance. If a serious effort were to be made, there would have to be a readiness to resort to all prospective sources of opposition. Even then there would be no assurance of success. The protagonists of European Union would undoubtedly also be able to rally impressive support if it appeared that a formidable organized effort was being mounted to defeat or dissuade the advocates of Union with Europe.* * * * *Even a successful all-out campaign would leave a good deal of bitterness in the U.K. and perhaps in other places (such as the Netherlands and the Scandinavian countries). Those who were held responsible for such a situation might not receive much political credit even at home.An unsuccessful full-scale campaign would leave a shambles. It would be very hard then to pick up the shattered and pieces and reconstruct a reasonable economic and political relationship between Canada and the U.K. and between Canada and Europe. Would it be going too far to imagine that in such a desperate political and economic situation Canada would either have to “go in with” the United States or accept a position of defiant (but un-splendid) isolation?* * * * *The moral of all this would seem to be that while we should not allow ourselves to be pushed, and while we should not hesitate to warn the U.K. Government sternly of the dangerous political pitfalls on the course which they are contemplating, we should refrain from “do-or-die” opposition to their move. We should make it completely clear that we are not prepared to pay a price or undergo sacrifice for a doubtful political objective which is not demonstrably in our interest. We should avoid “brinkmanship” but should leave the British in no doubt that when, and if, they make up their mind to move they shall be in for some tough negotiating with us.

A.E. RITCHIE

495. J.G.D./MG01/XII/C/108.1 (Vol. 54)

Note du premier ministre Memorandum by Prime Minister

[Ottawa], June 10, 1961

U.K. Entry into European Trade Area

In connection with the United Kingdom entry into the European Trade Area I read the reports from London† which indicated that Prime Minister Macmillan wants to have this question decided by the latter part of August as the final Tariff arrangements for the next five years by the European Free Trade Area are going to be determined.That is apparently why he wants some kind of consultation in advance.There is a regular meeting in September or October to deal with economical and financial matters but that is too late. By the time it is called everything will be cut and dried.

J.G. D[IEFENBAKER]

496. DEA/12447-40

Message from Prime Minister of United Kingdom to Prime Minister

SECRET Ottawa, June 12, 1961

MESSAGE DATED 10 JUNE , 1961

In the light of our telephone conversation on the 9th June and of the statements which you made in your Parliament yesterday I have been thinking further about the arrangements for Commonwealth consultation on the European problem.We have made it plain from the outset that we would consult other Commonwealth Governments fully before reaching any decision to negotiate with the Six, and we have always contemplated that throughout any such negotiations we should need to make special arrangements to enable us to keep in close and continuous touch with other Commonwealth Governments. I do not at all exclude the possibility that at some stage it will be necessary and appropriate to hold some collective Commonwealth discussion at a meeting of Prime Ministers. But I am sure that it would be premature to envisage such a Conference at this stage. What we have to do now is to make up our minds whether there is a reasonable prospect of obtaining in any negotiations with the Six safeguards for the essential interests of other Commonwealth countries. What these essential interests are and how they can best be handled is something which we in the United Kingdom would not wish to try to judge unilaterally. It is something which we wish to work out together with our Commonwealth partners. The extent and the ways to which the various countries of the Commonwealth would be affected vary widely from one country to another, and I am sure that it will be more profitable for this particular phase of the consultations to be conducted on a bilateral basis. It was for this reason that I proposed a series of visits to Commonwealth capitals, I proposed that these should be undertaken by senior members of my Cabinet because I am sure that we ought now to look at these problems jointly at a political level.One of the particular questions which these Ministers will be discussing in Commonwealth capitals is that of the machinery required for continuing consultation. I am specially anxious to have your views and those of other Prime Ministers on this.I am asking Duncan Sandys to visit the three “old” Commonwealth countries because I believe that the issues at stake for them are perhaps the most vital in the Commonwealth context. He has been a member of the small group of Ministers which has been considering this problem here under my Chairmanship, and he is fully versed in all its aspects.As regards timetable I propose that Duncan should leave for Canberra on the 23rd June. He will need four days or so there and about the same time in Wellington. This means that he could reach Ottawa by about the weekend of the 8th/9th July. I hope very much that this will be convenient for you. It is important that he should be able to get back here by the middle of July for the further discussions we must have on this before our Parliamentary recess.You asked whether we could send you in advance a memorandum giving “a fairly specific indication of the nature of the arrangements which we might contemplate as a basis for negotiations with Europe.” As I have said above we do not wish to reach a view about the special arrangements that we might seek to get for the Commonwealth until we have had these further discussions with our Commonwealth partners. If we tried to set these down precisely now we should be anticipating the very discussions which we are now proposing to hold with you and other Commonwealth Governments. I am, however, arranging for a Paper to be prepared describing the stage which we have now reached and indicating the nature of the problems about which we have jointly to confer.

Your message† delivered to Prime Minister’s Office before 2 p.m. London time. He made statement in House at 4 p.m., of which I shall send you full Hansard report by mail tomorrow morning. In statement he said “We regard it as essential that there be consultation. I have arranged for Secretary of State for Commonwealth Relations and two other senior ministers to make individual visits. My proposals have been generally welcomed.

He then said that he had been in touch with you and his words were “He is very happy about the arrangements.” Under strenuous questioning from the Opposition, he did say that it might be necessary for there to be a collective meeting of ministers, and under further questioning he said that possibly after that there might be a meeting of prime ministers.

He did make one very significant statement. In response to questioning by Gaitskell, he said that “the only decision now is whether or not repeat not to enter negotiations.” Then, again under further questioning from Gaitskell, he said “The Prime Minister of Canada has greatly welcomed my last communication.”

In answer to another question he made what seemed to me a significant comment. He said “There are those who think there should be some federal organization in Europe and there are those who think that it should be a confederal arrangement such as the French apparently prefer.” Then again referring to the idea of the present trips of ministers he said “the first thing to find out is whether negotiations can be made.” I find it difficult to place any other interpretation on these words than that they regard these visits as consultations and upon that basis they will determine whether there should be negotiations. That is why I think the utmost caution should be exercised in giving Sandys any opportunity to convey the impression that he has had consultations with you personally and then place his own interpretation upon them through his well-known method of anonymous press briefings.

There is no repeat no doubt that this subject has now become an issue of primary importance. I can seldom recall so angry a House, and when the speaker announced that no repeat no further questions would be permitted on the statement made by the Prime Minister, there were at least twenty on their feet on each side of the House seeking the right to speak. Perhaps some indication of the atmosphere is contained in Macmillan’s remark to Shinwell. The latter asked Macmillan if he did not repeat not realize that the fate of the Commonwealth was being endangered by the course that is being followed. Macmillan, who is usually so urbane, created tremendous uproar when he commented “The honourable gentleman has become very patriotic in his old age.”

I was interested in the fact that you apparently received Macmillan’s message yesterday afternoon. It arrived in Ottawa on Saturday and was in my possession early yesterday morning. I am even wondering, in view of the comments made by Macmillan today, if he has yet received the report of your conversation with the High Commissioner. This does lead me to suggest that any messages to be communicated to Macmillan be sent here for transmission, because they will be delivered without delay day or night. It also leads me to suggest that it would be helpful if Robinson could keep me informed of any significant communications from Earnscliffe, as it would appear we may not repeat not learn of them otherwise.

[GEORGE] DREW

498. DEA/12447-40

Memorandum from Under-Secretary of State for External Affairs to Prime Minister

CONFIDENTIAL Ottawa, June 14, 1961

The United Kingdom and the European Common Market

On instruction the French Embassy have now conveyed to us the conditions under which they would be prepared to agree to United Kingdom accession to the Common Market. These are:

The United Kingdom would have to accept the common tariff and not simply a harmonized tariff;

The common tariff would have to be applicable to the products of all countries not themselves members of the common market;

The arrangement would have to include agriculture, and could not be confined to industrial products;

The United Kingdom system of subsidies or deficiency payments would have to be modified as it could not, in the French view, be reconciled with a common agricultural policy;

There would have to be uniformity of agricultural prices throughout the common market area;

Agricultural products would have to be able to circulate freely within the whole of the common market area;

All of the members of the common market would have to accept a joint responsibility for dealing with surpluses that might arise.

These terms are very stringent from the point of view of both the United Kingdom and ourselves. It is particularly worrying with respect to agriculture. The French decision, however, is consistent with what they have been saying in the past and with the position they took in the earlier free trade area negotiations three years ago.

In view of the possible negotiations which lie ahead, the French position must be regarded as a bargaining one. However, they regard their position as very strong (and their assessment is probably fairly accurate) because:

they have indicated that they would be unwilling to move into the second phase of the common market until the agricultural issue within the EEC is resolved;

the United Kingdom Government have said publicly that they could not allow negotiations this time to fail;

the French would appear to have the support of the United States in pressing the United Kingdom to accept most of the provisions of the Rome Treaty in order not to weaken the political fabric of the EEC.

N.A. ROBERTSON

499. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], June 15, 1961

Present

The Prime Minister (Mr. Diefenbaker) in the Chair,

The Minister of Finance (Mr. Fleming),

The Minister of Trade and Commerce (Mr. Hees),

The Minister of Transport (Mr. Balcer),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of Justice (Mr. Fulton),

The Minister of National Defence (Mr. Harkness),

The Minister of Citizenship and Immigration (Mrs. Fairclough),

The Minister of Fisheries (Mr. MacLean),

The Minister of Labour (Mr. Starr),

The Postmaster General (Mr. William Hamilton),

The Solicitor General (Mr. Browne),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of National Health and Welfare (Mr. Monteith),

The Minister of Agriculture (Mr. Alvin Hamilton),

The Minister of Public Works (Mr. Walker),

The Secretary of State (Mr. Dorion),

The Minister of Northern Affairs and National Resources (Mr. Dinsdale),

The Minister without Portfolio (Mr. Halpenny).

The Secretary to the Cabinet (Mr. Bryce),

The Assistant Secretary to the Cabinet (Dr. Hodgson).

The United Kingdom and the European Common Market

(Previous reference June 9)

The Prime Minister said that the United Kingdom government had asked whether Mr. Sandys’ visit to Canada might be scheduled for June 25th to 29th inclusive. This change had been requested because the Australian government was unable to receive Mr. Sandys on dates previously prepared. The Japanese Prime Minister would be visiting Ottawa on June 25th and 26th. Furthermore, the proposed dates were likely to conflict with the Budget debate.The British government seemed to be trying to complete preliminary discussions with Commonwealth countries so that before the end of July they might indicate formally their desire to join the Common Market. The French government had stated that the United Kingdom would be admitted only on the basis of full compliance with the Treaty of Rome, and an arrangement on these terms would have serious implications for Canada.

During the discussion the following points were raised:

Mr. J. Rey, Secretary General of the Common Market, had informed the Secretary to the Cabinet earlier on this day that the Six were not pressing the U.K. government to act quickly. Mr. Rey anticipated that the proposed joining might take some time to work out, and that the detailed study of the question would not get under way until the autumn of 1961. Some derogation from the Treaty of Rome might be accepted, but this would be a matter for negotiation after the completion of the detailed study.

The U.K. High Commissioner had also stated that events were not really moving as quickly in that country as the London newspapers were implying.

The tactics of the U.K. government seemed to be to obtain the support of Australia and India and some other member countries before approaching Canada and New Zealand, the only two countries that had been expressing opposition to U.K. membership in the Common Market. Recently, there had been some signs that the Australian government was becoming more impressed with the possible dangers of the proposal.

Mr. Sandys’ visit should be postponed to mid-July, or later if possible. The greater the delay, the more the U.K. government would be under pressure to avoid taking a step that might dissolve the Commonwealth. The British press was already drawing attention to this possibility.

The Cabinet,

noted the suggestion of the government of the United Kingdom that Mr. Sandys visit Ottawa this month to discuss the possibility that the U.K. might join the Common Market; and,

agreed that the Prime Minister should suggest to the U.K. government that the visit be postponed until mid-July, or later in July if possible.. . .

500. DEA/12447-40

Memorandum from Special Assistant to Secretary of State for External Affairs to Under-Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], June 15, 1961

Visit of Mr. Sandys

This is to confirm that following the Cabinet meeting this morning, the Prime Minister gave instructions that Earnscliffe be informed that owing to the budget and other parliamentary matters, it would not be possible for the Ministers concerned to meet with Mr. Sandys during the last week of June.

After speaking to the Departments of Finance and Trade and Commerce regarding the programmes for July of Messrs. Fleming and Hees, I conveyed the Prime Minister’s message to Fowler with appropriate regrets and said that the dates most convenient from the Canadian point of view would be July 11-15 (of which the Prime Minister himself would be in Ottawa July 14 and 15). I also told Fowler, in response to his enquiry, that the Prime Minister would prefer not to have it suggested that the first week of July might be a possible time from the standpoint of Canadian Ministers.

I have sent a telegram in the above sense to the High Commissioner in London and to the Minister in Geneva.

H.B. ROBINSON

501. DEA/12477-40

Ambassador in United States to Secretary of State for External Affairs

There is a good deal of reluctance in the State Department to becoming involved in the controversies and negotiations which would precede UK entry into the Common Market. Although it has attempted to avoid taking sides publicly, USA has already been subjected to criticism that it supports EEC at the expense of EFTA. The expression [of] USA views on particular issues arising in the negotiations between EFTA countries and EEC would make USA even more vulnerable to criticism and recrimination, as is shown by the recent controversy over the mechanics of the negotiations (i.e. the simultaneous or two-stage problem referred to in our telegram 1874 June 12).† Hence a non-committal attitude appears the course of wisdom to those concerned with this matter in the State Department.

However, there are two reasons why it seems very doubtful whether USA will, in fact, be able to remain aloof from the negotiations once they begin: (a) USA interests will be directly involved; (b) the protagonists are already addressing appeals to Washington either for expressions of opinion on issues which have arisen or for support for positions they will attempt to carry in the negotiations.

If USA enters the arena there is a wide variety of ways in which it might attempt to use its influence. Three broad courses of action merit attention at this time. USA might: (a) support or oppose UK efforts to obtain major derogations from the Rome Treaty in the interests of UK agriculture and the Commonwealth; (b) facilitate the conclusion of special marketing arrangements to protect the export industries of third countries from serious injury as a result of UK entry to the Common Market; (c) seek to mitigate the injurious discriminatory effects of the enlarged Common Market by MFN tariff reductions negotiated among the members of the North Atlantic community.Derogations from the Rome Treaty

It could be argued that UK adherence to EEC would be seriously prejudicial to USA agricultural interests if UK were obliged to participate in the CAP and that USA might therefore favour an exemption for UK from the latter. However, political objectives dominate the thinking of USA government and there is no repeat no indication that this will change. During Mr. Macmillan’s visit to Washington, President Kennedy told him that USA would not repeat not accept or support any derogation from the Rome Treaty in respect of agriculture on the grounds that although the agricultural provisions of the Common Market created substantial difficulties for USA, a careful balance had been achieved in the EEC negotiations which took into account the agricultural question and that, in USA view, any move to exclude agriculture at this stage would result in wrecking the Common Market.

We have also learnt that USA authorities consider that the current French attitude on the related questions of the next round of EEC acceleration and progress on the CAP are directly linked to the possibility of UK entry into EEC. According to USA officials, French consider that it would not repeat not be possible for UK to begin negotiations much before the year end and they are determined to firm up the CAP by that time, using the desire of other EEC members for further acceleration as leverage. USA authorities appear to acquiesce in this French position, thus providing further evidence that their own position on EEC agriculture remains unchanged.

Insofar as USA interests are concerned, granted USA political support for an enlarged EEC without significant derogations from the Rome Treaty, the best that USA authorities could hope for in the short run would appear to be that UK would accept the CAP and would work from within to modify it in a direction favourable to the interests of other agricultural exporters. USA officials are, however, rather doubtful about the extent of UK bargaining power in such an exercise.

In their assessment of the prospects for USA agricultural interests, USA officials are also faced with another complicating factor: they appear to be moving towards the conclusion that UK agriculture is likely to be a less serious obstacle to UK entry in EEC than the Commonwealth problem including, of course, temperate foodstuffs. While we would expect USA to oppose any major derogation from the Rome Treaty on behalf of the Commonwealth, other alternative solutions are available. Some of these, discussed below, might have an adverse effect on USA agricultural markets in Europe and this has caused USA officials some concern.Special Marketing Arrangements

For USA, the least objectionable method of safeguarding Commonwealth economic interests on UK entry into the EEC would clearly be one which equally safeguarded other third-country interests without impairing the integrity of EEC. Even this would cause difficulty for USA since it implies special marketing arrangements in the enlarged EEC for exporting countries and USA authorities, as a matter of economic theory and in the interests of the rational development of the Common Market over the long run, would probably find the permanent establishment or the institutionalization of such marketing arrangements objectionable.

Anticipating that other solutions may be discussed during the UK/EEC negotiations, the State Department has made a study of the impact of UK entry into the Common Market on USA agriculture exports to the area under various other assumptions. One extreme assumption was the Commonwealth countries might be associated with the Common Market as AOTs under Part IV of the Rome Treaty. The study apparently suggested that the results might well be catastrophic for USA with the loss of e.g. all of its EEC tobacco market to Rhodesian imports and 5 percent of its coarse grains market to Australian and Canadian imports. This possibility therefore seems remote both on the grounds of certain USA opposition and the unlikelihood that it would appeal to the present members of EEC or to Commonwealth countries themselves.

The State Department also considered the possibility of some form of special preferential marketing arrangements for Commonwealth agriculture exports to the enlarged EEC. Such an arrangement might take the form of modified preferences or of tariff quotas. Both would be unattractive to USA but, to the extent they met legitimate Commonwealth concerns and did not repeat not react to the detriment of USA agriculture exports, they would be less objectionable than either a derogation from the Rome Treaty or a solution under Part IV of the Treaty. However, if USA would find it difficult to go along with permanent or institutionalized special marketing arrangements for all third exporting countries (paragraph 8 above), it would, a fortiori, have greater difficulty with a similar but preferential arrangement for the Commonwealth. Probably the ultimate which USA could accept along these lines would be transitional arrangements for a limited period. They would not repeat not therefore constitute “compensation” for Commonwealth countries but mitigation for a transitional period. In addition USA interests in the detailed negotiation of such special arrangements might be expected to diverge from those of the Commonwealth countries concerned to the extent that any special arrangements threatened to cut into USA markets. Finally, USA is extremely concerned about Latin American countries’ export prospects and will face a serious policy dilemma if a solution of the Commonwealth problem involves, even for a transitional period, a privileged position in the enlarged EEC market for Commonwealth as compared to Latin American countries.The North Atlantic Community

Speaking privately, State Department officials have told us that the long term objective towards which USA will be working is a low tariff North Atlantic community. This is, of course, an embryonic idea at present and faces many hurdles, including the difficult congressional fight which is expected next year over the renewal of the reciprocal trade agreements legislation. Without renewed tariff cutting authority, USA ideas for tariff reductions among North Atlantic countries cannot repeat not be made effective. The fact that the new legislative authority is most unlikely to be voted until the latter part of next year also means that the implementation of the ideas cannot repeat not begin before 1963 at earliest. They are, however, of some interest. In the first place they would go some way towards reducing the discriminatory effects of the enlarged EEC. Second, if special transitional arrangements are the best that Commonwealth countries can secure for themselves in the UK/EEC negotiations, a low tariff North Atlantic community might offer some hopes for Canada, at least, to adjust in the long term to what are likely to be the realities of the enlarged EEC. Third, in the opinion of USA officials OECD may have a major role to play in eventual negotiations for a low tariff North Atlantic community.

502. DEA/12447-40

Ambassador in United States to Secretary of State for External Affairs

UK membership in EEC under the present terms of the Rome Treaty would have a far more direct and serious impact on Canada than on USA. The trade effects on Canada would include basic changes from our present preferential and duty free access to UK both for industrial and agricultural goods. These losses with respect to Canadian terms of entry in UK might well be mitigated, and possibly even offset in the long run, by some lowering of the Common External Tariff resulting from UK adherence to EEC and by the growth of trade stemming from a wider mass market in Europe and UK. The extent to which Canada would share in this growth would of course depend on the nature of the arrangements that might be negotiated.

UK merger with the Six would involve not repeat not merely increased trade discrimination but would entail basic changes in Canadian and Commonwealth trade relations with UK and would have far-reaching psychological and political implications. The effect on Canada (and other Commonwealth countries) thus differ not repeat not only in degree but also in kind from the effect on USA.

The negotiations between UK and the EEC will therefore affect vital Canadian interests. While many of the main elements will be outside direct Canadian control there will be an important stage involving bilateral and wider consultations in the Commonwealth framework. However, present USA policy (which tends to reinforce that of the Six) could be expected, by opposing substantial derogations from the Rome Treaty except possibly in terms of a transitional period, to limit the scope of UK/EEC negotiations and narrow the possibility for effective safeguards for Canadian (and other Commonwealth) trade to what would in effect be a salvaging operation involving limited concessions on an MFN basis in UK, Europe and USA to offset losses in Commonwealth tariff preferences. Even at best this would mean replacing special and valuable Canadian advantages by piecemeal compensation.

It can therefore be argued that, in addition to the important Commonwealth consultations envisaged, from Canadian point of view, what is required is more room for manoeuvre and, as a prerequisite, a loosening up of the attitude of USA. The entry of UK into EEC, and the consequent injection of Commonwealth interests into the European scene, might well provide an opportunity for a significant reorientation of USA policy not repeat not only in relation to EEC but also in foreign trade matters generally. Some thinking along these lines is, in fact, under way here and it is for consideration whether Canadian interests might not repeat not be promoted by embarking on a process of serious exploratory discussion with USA authorities, designed to influence them in a direction favourable to ourselves and to support them against the domestic protectionist pressures which may be exercising an opposite influence. The timing and objectives of such discussions would, of course, require careful consideration in the light of the assessment of Canadian interests and the broader perspective available in Ottawa.

The question arises whether there is a realistic possibility of changing USA attitude and, in particular, of getting the USA authorities to focus on the immediate problems of the Commonwealth and the broader issues involved. USA policy towards EEC would appear to be too deeply established to be fundamentally altered and it therefore seems very doubtful whether any variant of the original UK FTA proposals, such as the new Swedish plan,Footnote 23 or any major derogation from the Rome Treaty would receive sympathetic consideration (let along support) in Washington.

A case might, however, be made along the following lines: we could seek to impress on USA authorities in some detail the serious nature of the issues raised for Canada by prospective European developments and to make it clear that these go well beyond purely European questions or questions of increased trade discrimination. They involve fundamental changes in Canadian and Commonwealth relationships with UK, having both economic and political implications from which USA should not repeat not remain aloof. We could argue that the present USA position, while in effect closing the door to derogations from the Rome Treaty, fails to substitute any other satisfactory solutions from the point of view of other third countries directly affected. We might then go on to suggest to USA authorities that means must be found to mitigate the impact of these developments on world trade relations. Three main areas of approach, none of which are mutually exclusive, might be explored:

Apart from derogations intended to retain as much as possible of the Commonwealth’s special position in the UK market, there is the possibility of transitional accommodation on either a preferential or non-preferential basis (our telegram 1957 June 20 refers).

Basic Changes in EEC Policy. This would require very strong USA pressure on the Six substantially to reduce their external barriers and to modify their agricultural régime as part of the process of European Union. This approach would be consistent with present USA policy and also with the terms of the Rome Treaty. Such policy changes in the Common Market would go a long way in easing the impact of UK merger on the outside world but seem unlikely of realization on a unilateral basis by Six.

New Multilateral Initiatives. Possibly a more hopeful approach might be to suggest that the UK move into Europe should be made the occasion for a determined advance towards broad multilateral trade liberalization involving not repeat not only duty free entry for selected tropical products but an extension of duty free entry to basic raw materials, reduction of agricultural protection and significant tariff reductions by UK, the Six and USA. This would be a major move towards a new alignment of trading relations among members of the free world.

There would not repeat not appear to be any inconsistency in pursuing one or more of the above lines simultaneously and it might indeed be useful to do so, at the proper time, in any approach made to USA authorities. These lines are, moreover, not repeat not entirely alien to the thinking of USA Administration as witness, for example, the USA emphasis on the concept of an Atlantic community, USA proposals for free trade in tropical products, for a multilateral solution on textiles and for much greater common efforts in foreign aid. Thought is also being given to the renewal and recasting of USA reciprocal trade agreements legislation next year. While directly related to the UK/EEC problem, Canadian discussions with USA authorities might also serve a useful purpose in relation to this legislation by strengthening the Administration’s hand against the protectionist pressures mentioned in our telegram 1836 June 8† a renewal of the Administration’s tariff cutting authority would, of course, be a necessary condition for new multilateral initiatives of the kind mentioned above.

503. DEA/12447-40

Memorandum from Assistant Director, International Trade Relations Branch, Department of Trade and Commerce to Counsellor, Embassy in United States

CONFIDENTIAL [Ottawa], June 26, 1961

U.K. and Europe

The following are points of interest in conversations with Reisman, Sanders (UK) and Wyndham White.

Canadian Position The Canadian position is that the UK must make its own decision but it should do so in the full knowledge of Canadian views. Canadian ministers and officials seriously question the validity of the political and economic arguments for the UK joining the Six. At the same time they stress the political importance of the Commonwealth to the Western world as a whole and point out that free access to the UK market is the “keystone” of the Commonwealth system. UK membership within the Rome Treaty would thus hold serious consequences for the future of the Commonwealth. In addition to this general point, Canada attaches great importance to her traditional terms of access to the UK market for both manufactures and agriculture and will pursue whatever policy may be necessary to ensure the maximum retention of these terms of access. Specifically if, in spite of expression of these Canadian views, the UK decides to join the Six, Canada’s negotiating objective would be to obtain maximum derogations from the Rome Treaty for Commonwealth free entry and preferences.

French PositionKojeve told us that the real purpose of his presence in Washington was to express French views on the question of the UK joining the Six. He indicated these were the views of Wormser and Clappier and that they reflected General de Gaulle’s assessment. He said the French disagreed with the U.S. view that UK membership in the Six would be politically desirable. The French realized that Germany would, in time, become the dominant power in the Six but that if the UK were within the group, far from representing a counter-weight, this would force the UK into commitments towards Germany. In the French view the UK could exert a more powerful independent influence counter-acting Germany by standing outside the Common Market than by joining it.

UK PositionSanders described the split within the UK on the issue of membership with Europe. He said that Macmillan was “rushing blindly and emotionally” into what he felt was an historic decision. The Foreign Office had written off the Commonwealth as a strong continuing political entity and was “under the illusion” that the UK could exert the dominant role in Europe by joining the Six, and that this would also bring them closer to the U.S. Sanders said this view was not shared by other government departments or in many sections of the country. In particular, this assessment was strongly opposed by the Board of Trade and the Commonwealth Relations Office. Sanders personally disagreed with the view that UK membership would benefit the UK commercially. He also felt the indirect economic benefits from membership in the Rome Treaty could be achieved by other means.Wyndham White commented that, if the UK policy was to join the Six, they should have signed the Treaty and argued about derogations afterwards. While it was easy for the French to keep the UK out by refusing to agree on suitable terms, it would be impossible for them or anyone else to kick the UK out, once they were in. The Six would, thus, be in a much weaker bargaining position in negotiating detailed terms. Wyndham White thought the UK had missed the psychological moment for joining the Six and the dissident forces, both within the UK and outside, would now gather momentum.

U.S. PoliciesWyndham White said he had not been too impressed with the present policy team in State Department in terms of their effectiveness. The situation seemed very chaotic. He did not feel that one could look to the U.S. to come up with very far-reaching and sustained initiatives in trade policy at this time. However, there were some very good people in senior positions in the Administration and a general receptivity to imaginative ideas. Wyndham White thus felt it was important for the impetus to come from the outside and that while the U.S. itself might not initiate, the U.S. might well respond favourably to external pressures. In connection with next year’s trade agreements legislation, Wyndham White thought that outside countries should face the U.S. with the maximum challenge and, in fact, it would be as easy or as difficult for the Administration to seek far-reaching authority as to seek something much more modest.

OECD and GATTWyndham White seemed very resentful about the apparent indecision of the U.S. and particularly of Ball with regard to whether GATT or OECD should handle the textile problem. Wyndham White said he had told Ball flatly that he would not attend the textile meetings if Kristensen was also invited. He felt strongly that the time had come for him, as GATT Executive Secretary, to take a firm stand and the U.S. Government with the basic issue of whether GATT or OECD was to be the central forum for trade policy negotiations. He stressed this was not a question of jurisdictional disputes or personal involvement, but a deeply-felt view of his responsibilities toward other GATT members. He considered it would be most unfortunate if the major governments were to develop any substantive trade policy decisions within OECD.

In his message of June 10 to Mr. Diefenbaker Mr. Macmillan said he was “arranging for a paper to be prepared describing the stage which we have now reached and indicting the nature of the problems about which we have jointly to confer.”The Present Situation

The starting point in the analysis of the problem with which we have to deal is the undoubted fact that the European Economic Community (E.E.C.) is developing into an effective political and economic force. The Community is already ahead of the programme for tariff reductions laid down in the Rome Treaty. By the end of this year, internal tariffs will probably have been reduced to half the level prevailing in 1957. Progress towards implementing the economic and social provisions of the Treaty has been less rapid. But there can no longer be any doubt that the Six are moving surely and steadily towards a wide range of common policies in these spheres. In addition to the normal meetings of the Council of Ministers of the E.E.C., Ministers responsible in other fields meet from time to time to discuss common problems. The habits of co-operation which are developing at all levels are likely to encourage a progressive sense of unity and understanding in the political as well as in the economic field. Indeed, the Six are now in the process of establishing machinery for regular political consultations. The Community has acquired a dynamic of its own, with wide popular appeal in the six member countries.

This rapid and healthy development of the Community is to be welcomed for many reasons, and especially for the assurance it gives of strength and stability on the Continent of Europe. On the other hand, it is bringing about an increasingly wide economic and political division in Western Europe as a whole. This is liable to create weakness in the Western Alliance, and to affect adversely the political and economic position of the United Kingdom, and consequently of the Commonwealth. It is important to the United Kingdom and to the Commonwealth as a whole that we should be in a position to influence the policies adopted by the Community – economically as a purchaser, financially as a supplier of capital, and politically in the context of the dangers from the Soviet bloc – in a direction consistent with our own policies and with our interests.

We realised this problem at an early date. When we decided at the end of 1955 not to take part in the negotiations for the establishment of the E.E.C., we were influenced by two considerations, in both of which we were to be proved wrong. First, we doubted whether the Six would succeed in establishing an effective and developing Community; the developments described above have removed these doubts. Secondly, we thought that a satisfactory form of association could be established with the E.E.C. on terms which would raise fewer difficulties for us than full membership.

The prolonged negotiations for a Free Trade Area which we initiated in the autumn of 1956 finally broke down at the end of 1958. We then opened informal discussions with a number of O.E.E.C. countries outside the E.E.C., about the possibility of establishing an association on free trade area lines which would enable intra-European trade to continue on a multilateral basis over as wide an area as possible; provide some compensation to member countries for the losses which they would incur in E.E.C. markets; and assist in promoting the negotiation of a wider agreement with the Six. Formal negotiations followed and the Stockholm Convention establishing the European Free Trade Association was signed in November, 1959. Thereafter, we attempted to revive negotiations with the Six through the Trade Committee of Twenty-One set up as a result of the special economic conference held in Paris in January, 1960. But it became clear to us during the summer of 1960 that the Six were not prepared to negotiate on the basis which we had formerly envisaged and that there was no hope of reviving the free trade area proposals.

In August, 1960, the Prime Minister and Dr. Adenauer, meeting in Bonn, decided to put in hand at official level, and on a bilateral basis, an informal examination of the problems in the way of agreement. These talks led to similar exchanges with the Italians and French. Two conclusions have emerged from these talks:

no half-way house is possible. The Six are not prepared to allow us to participate in certain aspects of the work of the Community without accepting broadly the obligations of membership. This was not the view of the French alone: it was shared by all the Six and expressed firmly by the German Government.

at the same time, the Six recognise the political and economic value of the Commonwealth association and the importance of maintaining it.This has certainly been one of the achievements of the prolonged talks which we have held during the last eleven months. Consequently, we believe it safe to conclude that some arrangements to protect essential Commonwealth interests will be negotiable.

What has not become clear from these informal talks is the nature of any specific arrangements that might be made to protect Commonwealth interests if we were to become a member of the Community. This is no doubt partly because the Governments with which we have had discussions would not wish to display their hands in advance of possible negotiations in which numerous factors would have to be balanced; but it is also because individual Governments of the Six could hardly commit their partners in matters which would be for negotiation and decision by the Six as a group. While therefore we believe that the need for special arrangements to protect Commonwealth interests is accepted in principle by the Six Governments, we do not think it possible to assess the nature and scope of such arrangements in advance of formal negotiations with the Community.The Problem before us

In the last few weeks we have been giving careful consideration to the situation in the light of the various discussions referred to above. We have also of course had very much in mind the indications of the views of other Commonwealth countries, that they have given to us both bilaterally and in the course of various Commonwealth meetings. In these discussions other Commonwealth Governments have naturally made it plain that their judgment is reserved until they can know what arrangements will be made in regard to their essential interests in the event of our joining the E.E.C. At the meeting of senior Commonwealth officials in May of this year, the United Kingdom spokesman indicated that we were trying to make an assessment of what terms and special arrangements we might reasonably expect to obtain in order to cover the interests of the other Commonwealth countries (and also of our own agriculture and our E.F.T.A. partners) if we were to decide to negotiate with the Six. However, it now appears – for the reasons indicated in paragraph 7 above – that no worthwhile assessment of this kind can be made at this stage, and that this would only be possible through actual negotiations. The immediate question we therefore have to deal with is not whether we should join the E.E.C.: this question would arise only when we knew what terms and conditions could be negotiated. The question now is whether or not to enter into negotiations with a view to finding out what these terms and conditions would be.

As indicated above, we believe that negotiations would be possible only on the basis that we should be prepared to accept broadly the obligations of membership of the Community. We believe, however, that it should be possible to reconcile this with obtaining special arrangements to protect the essential interests of the Commonwealth, as well as those of our own farmers. If the Six were prepared to negotiate on this basis it might lead to an acceptable agreement. We must of course contemplate the possibility that the negotiations might fail. A breakdown would certainly be a serious matter; but the risk of a failure of negotiations in circumstances in which world opinion would see that we had made a genuine effort to reach agreement, and that the Community were demanding unreasonable terms, has to be compared with the alternative course of deciding to make no attempt at negotiation and to allow Europe to become more and more deeply divided.

If we were to enter into negotiations, we should not attempt to set out in advance a list of minimum requirements in respect of Commonwealth interests or of our own agriculture. It would be unwise to show our hand in this way at the outset of a negotiation; and in any case the existing position in the E.E.C. is still undetermined in various matters of importance to the Commonwealth interest – e.g. its common agricultural policy has yet to be defined. It would however be necessary for us to know clearly what are the interests to which other members of the Commonwealth attach special importance and to consider the various ways in which they might be dealt with.

Against this background, the matters which Mr. Sandys will wish to discuss with Canadian Ministers are:

the political and economic implications of our joining the E.E.C., as compared with the political and economic consequences of our staying out;

the Canadian Government’s views on the economic implications for Canada of this possibility, the economic interests for which they consider it essential that we should seek some special arrangements in the event of our deciding to negotiate with the E.E.C. and the possible forms that such special arrangements might take; and

in that event how best to organise a system of close and continuous Commonwealth consultation to cover the period of preparations for negotiations, the negotiations themselves, and the eventual decision, in the light of the results of the negotiations, whether or not to join the E.E.C.

505. J.G.D./MG01/XII/D/37.1

Memorandum from Secretary to Cabinet to Prime Minister

SECRET [Ottawa], July 4, 1961

Sandys’ Visit next Week

I thought I should record for you a number of points in connection with the planning for Sandys’ visit and make several suggestions in connection with it. I have seen the various suggestions from External Affairs on the matter and make the following comments with that in mind:

The Cabinet Committee has not had a chance to meet as yet because the Ministers are too busy with other things. It does not look as though they will be able to meet before Thursday, depending on the business in the House.

We have not yet received the U.K. paper which you requested. It has arrived in Earnscliffe but so far Garner has not been authorized to give it to us.

I think it is desirable that you should see Sandys first but only briefly and then that you should see him at the end. I would suggest you have him call on you late-ish on the Wednesday afternoon on which he arrives. I suggest below what you might say to him at that stage.

I think the major discussions should take place with the four Ministers concerned on the Thursday and Friday. At this stage I think all that needs to be said to Garner is that we would plan to have discussions between Mr. Sandys and the four Canadian Ministers on Thursday and Friday.

I would suggest that at the first discussions with the Ministers some officials should be present in order that they can hear the U.K. presentation and get to work on analyzing it and preparing answers. There will be ample opportunity for meetings of Ministers only with Sandys during the two days and evenings if necessary.

I think Mr. Green should give a dinner for Mr. Sandys and his party on Thursday evening after the first day’s discussion on behalf of the Government. I would suggest that this should be the only large party. I understand Garner would prefer to give a small dinner for Ministers only. I would suggest that you should invite Sandys up to lunch at Harrington Lake on the Saturday, with an understanding that the two of you will have a private conversation over lunch and have an hour before or after lunch. This will enable you to get a report on Saturday morning from your colleagues by telephone or on paper as to the results of their discussion before you see Sandys personally.

On the substance of the issues, the officials have already given you and the other Ministers a long memorandum† and I won’t try to recapitulate any of it here. I think you should make clear at the very beginning, however, the essential nature of the difficulties we see as well as the extent of the Government’s apprehension. I think you should do so without making any statement either to Sandys or in public that could be used to blame Canada for upsetting a move that is now the evident desire of the U.K. Parliament and public, as well as the U.K. Government, whatever they may say about not having reached a decision as yet. I would think the following points would be those to make at your initial meeting:

The decision to join the Six is a really major one which the U.K. Government must ultimately make itself but we hope it will only be made after full consultation with the Commonwealth.

It is very hard to judge the general international effects of this move and we are not convinced it will increase the United Kingdom’s influence in the world. We do not believe that any general international considerations can be taken to justify the potential harm that this move may do to the Commonwealth as an association and to the trade interests of the members of the Commonwealth in the U.K. market.

We think that quite substantial changes will be necessary in the trade arrangements between the United Kingdom and other members of the Commonwealth in order to adjust to the situation created by the United Kingdom’s joining the Six. Some changes will probably also be necessary in the trade arrangements between the Six (plus the United Kingdom) and members of the Commonwealth in order to help in rectifying the balance. The other Canadian Ministers will put the Canadian position on this point at greater length. We do not see how these necessary re-arrangements can be made without substantial derogations from the provisions of the Rome Treaty if not from its principles.

We do not believe that the United Kingdom is in a strong enough bargaining position vis-à-vis the Six to secure the derogations and concessions that will be necessary.

If it is not possible to make the adjustments required to continue Commonwealth trade arrangements on a fair and balanced basis, then serious harm is likely to be done to the Commonwealth as an association at the very time that it appears likely to prove most valuable in helping to bridge the widening gap between the white peoples and coloured peoples.

R.B. B[RYCE]

506. DEA/12447-40

High Commissioner in United Kingdom to Prime Minister

London, July 7, 1961

I thought you would be interested in the report in today’s Daily Express of a speech by de Gaulle at Metz last weekend.Footnote 25 This comes on top of a speech by Debré two weeks ago today in which he said that there was no question of France accepting less than the provisions of the Treaty of Rome so far as agriculture is concerned. He went on to say that they had understood there would be provisions which would give France special opportunities for the export of surplus agricultural products.Footnote 26If these speeches are to be taken at face value, and having regard to the disturbed agricultural position in France, that seems to be the correct interpretation, then it is simply impossible for Britain to join the Common Market on any basis which would recognize the traditional position of Canada, Australia and New Zealand in the export of various types of food products.I mention this with Duncan Sandys’ visit to Ottawa next week in mind. Already the usual inspired reports are creating the impression that he has soothed the concern of New Zealand, and goes on to Australia with New Zealand comparatively well-satisfied with the prospect of Britain joining the Common Market.While it is true that after you spoke so firmly to Sandys at lunch at his house last March, he did live up to his undertaking to you to try to bring about an agreed declaration along the lines you desired, it should not be forgotten that it was his office which created the impression in advance that it was only Canada which was insisting upon raising the question of apartheid. I remember reading the headlines right across the top of the Daily Mail in a copy of this newspaper which was being held up in front of him by a man several seats ahead of me in the plane on which I was travelling back to London from Liverpool. I recall that in big black type the words were, “Dief Shock for Conference.” When I got a copy of the paper after landing, I found that there was a detailed report of Sandys’ visit to various places in the East. According to this story, none of the others were concerned about raising the subject of apartheid, but it had been learned that Canada was going to force the issue. I took steps to find out the source of this story, and found that it came direct from Sandys’ office. I mention this because I see some tendency already to picture Canada as the one stumbling block in the way of Britain’s entry into the Common Market.More and more it becomes apparent that the considerations are more political than economic. That being so, I would hope that Sandys will be well cross-examined on that point and an effort made by Donald Fleming or George Hees to tie him down to a clear statement as to how far British sovereignty will be diminished if they become members of the Common Market. Already more than one of the Ministers have made speeches which referred specifically to “the sharing of sovereignty.” I fail to see how the Commonwealth as we know it could survive under those circumstances. If we were to be automatically involved in the consequences of action taken by a European Council of Ministers, then I should think the Statute of Westminster would become a scrap of paper.In any event, if it should be decided after a meeting of Ministers that negotiations are to be undertaken, then I should think there is much in the suggestion made by Holyoake that the representatives of the interested countries of the Commonwealth should be parties to those negotiations. After all, if arrangements are to be made which purport to protect the interests of the Commonwealth, then I do not think our constitutional relationship would justify a course which, in effect, made Britain the broker for the whole Commonwealth.A point which Duncan Sandys mentioned briefly before his departure, and which Reggie Maudling mentioned again yesterday, is that the British now are convinced that it is going to take some time even to reach a point when there can be effective consultation as to whether negotiations should be entered into or not. There seems to be agreement that the meeting of Finance Ministers would be an appropriate forum, but they are concerned about the meeting at Accra dealing with this subject. They base this on the fact that detailed records are not readily available and that the communication system with Accra is not too good. There may well be something in this point, and I should think that when Sandys is in Ottawa he will raise the possibility of moving the meeting of Ministers of those countries wishing to take part in such a round-table conference from Accra to London. Certainly, the records would be much more readily available here and, with the direct telegraph and telephone communication with Ottawa, any information could be obtained very quickly.Merely to indicate that this subject is already entering the emotional field, I am also enclosing a circular received today from the British Israel World Federation. I am not suggesting that this necessarily carried any special weight, but a glance at this circular will indicate the dangerous emotional possibilities of this subject.

Warmest personal regards.[GEORGE DREW]

507. D.M.F./Vol. 137

Memorandum

CONFIDENTIAL Ottawa, July 10, 1961

The Strength of the United Kingdom Negotiating Position

In judging whether or not the United Kingdom will be able to join the Common Market and on what terms, the following factors are relevant.Despite some opposition within both the Conservative and Labour Parties, the idea of union with Europe has widely based support in the United Kingdom. The Macmillan Government would regard inability to find a solution as a considerable domestic setback. The precariousness of the payments position and fears about the stagnation of the economy lend an almost desperate sense of urgency in the minds of those who support union with Europe. Moreover, the United Kingdom Government appear to have taken the view that they must join Europe if they are to maintain their international political position in the world. In these circumstances, despite their avowal to protect EFTA and Commonwealth interests, the United Kingdom Government may be prepared to accept a very stiff price for the returns they expect from joining Europe.In Europe opposition is largely centred in France. But even those who support the United Kingdom entry most vigorously – the Dutch and the Germans – insist that it must be worked out in a way that will not weaken the Rome Treaty. The Germans are prepared by and large to let the French set the terms. The Berlin crisis may even strengthen the Paris-Bonn link. There are also signs that the United Kingdom’s more difficult EFTA partners may be able to find a presentational solution that would permit them to acquiesce to a settlement largely on the terms of the Six.It is questionable, however, whether the French (and in particular de Gaulle) wish the British as members, even on the most demanding terms. Certainly their scepticism will make them intractable negotiators. We have already been told by the French that they expect the United Kingdom to accept the present common external tariff, that it should be extended against all third countries (including the Commonwealth), and that the United Kingdom must accept and implement the common agricultural policy. Some French spokesmen have also suggested that the United Kingdom should even “sign now and argue later.”The United States position gives little comfort to the British in seeking a solution acceptable to the Commonwealth. The United States are largely concerned with the security and military implications of a unified Western Europe. They would not welcome any United Kingdom proposals that detract from this basic concept. The United States may not wholly appreciate the political issues at stake in the Commonwealth; they have always been critical of the preferences which historically were developed in reply to United States protectionism. The United States stands to benefit from any loss to the United Kingdom of its preferences in other Commonwealth countries.On balance, the United Kingdom’s bargaining position does not appear strong – particularly in terms of finding solutions acceptable to Canada.It is possible that the United Kingdom will be able to seek arrangements that will reasonably accommodate the under-developed countries of the Commonwealth, but even this is uncertain at this stage.Opposition in the United Kingdom to the idea of joining Europe might stiffen if it appears that the French are demanding impossible concessions. The United States position could also become less sympathetic, if it appeared that United States commercial or agricultural interests would suffer, or that the net political result might be the creation of a “Third Force” in Europe.The United Kingdom now consider this to be the time when there is optimum support at home and in Europe for the move. The next few months could change their assessment of this support and they might change their minds about the wisdom or feasibility of joining the EEC. It could develop that the United Kingdom may find itself paying too stiff a price both in terms of French demands and the possible adjustments in other Commonwealth markets. In such circumstances, it seems important to preserve close consultation and cooperation between the United Kingdom and its closest Commonwealth partners if other alternative courses have to be explored later. This might be particularly true if United States commercial policy shows signs of embarking on a new course towards reviving global freer trading policies.

508. D.M.F./Vol. 137

Memorandum by Department of Finance

CONFIDENTIAL [Ottawa] July 10, 1961

The Strength of the United Kingdom Negotiating Position

Under point (a) of the Agenda proposed by the United Kingdom there will be discussion about the political and economic implications of the United Kingdom joining or staying out of the European Economic Community. Mr. Sandys will no doubt seek to persuade Canadian Ministers that, on balance, it will be advantageous for the United Kingdom to join both on political and economic grounds. From this he may be expected to argue that it is also in the best interests of the Commonwealth to have the United Kingdom join the E.E.C.We believe that there are serious reasons for questioning these judgments. A separate paper has been prepared on the political aspects. This memorandum deals with the economic aspects and covers some of the main reasons why we doubt that the United Kingdom will derive the economic benefits that they expect to secure by joining the E.E.C.Impact on United Kingdom Exports

The United Kingdom contend that joining the E.E.C. will bring about a substantial expansion in their exports to this large and growing market. No doubt the elimination of E.E.C. tariff barriers against United Kingdom goods will result in some expansion of sales. How large is this likely to be? And are there likely to be offsetting declines in other directions? The Common Market countries, at present, take no more than 14 per cent of total United Kingdom exports. Assuming that the improved terms of access to these countries result in an expansion of as much as 10 to 20 per cent, this would only represent something between 1½ to 3 per cent of United Kingdom exports to the world as a whole, that is, £50 million to £100 million. To regard this gain as a net gain would ignore the inevitable adverse consequences which United Kingdom entry into the E.E.C. will have on her terms of access to other important markets. At the present time, the Commonwealth takes almost 40 per cent of total United Kingdom exports, much of this on the basis of substantial preferences in favour of the United Kingdom. Impairment of preferences enjoyed by Commonwealth countries in the United Kingdom market cannot fail to have its counterpart in the reduction of preferences which the United Kingdom enjoys in Commonwealth markets. No one can say in advance how significant this negative impact is likely to be. However, it is worth noting that a decline of, say, 10 to 20 per cent in United Kingdom exports to the Commonwealth which could easily flow from such changes in preferential arrangements would amount to a loss of £135 million to £270 million in United Kingdom exports or nearly 3 times the assumed gain in United Kingdom sales to Europe.What about other markets? The United States takes about 10 per cent of United Kingdom exports. However neutral the United States attitude may be at present, is it safe to assume that new discrimination against the United States will not result in new protectionist moves in that country with a consequent impairment of United Kingdom exports (as well as exports of other countries, including Canada)?The United Kingdom may contend that joining the Common Market will improve their industrial efficiency and in this way enhance their export potential to third markets. This is a separate point which will be dealt with later in this paper.Agricultural Trade

The United Kingdom state in their memorandum that the agricultural policy of the E.E.C. has yet to be defined. While this is formally true the simple fact is that all of us, including the United Kingdom, now know enough about the intentions of the E.E.C. in the field of agriculture to know that the common agricultural policy will be much more restrictive against the outside world than is present United Kingdom agricultural policy.Even since the repeal of the Corn Laws more than 100 years ago, the United Kingdom, as a matter of national policy, have obtained their basic foodstuffs from the cheapest sources of supply with little or no tariff in order to keep down costs of production in industry. The United Kingdom’s system of support for agriculture is based on income support payments leaving internal prices to be determined essentially by the most competitive world suppliers.France has made it crystal clear that one of the minimum conditions of United Kingdom entry into the Common Market will be its adoption of the European common agricultural policy. This would mean that the United Kingdom would be obliged to adopt the European policy of price supports as well as the European policy of high protectionist barriers on virtually all agricultural imports. Under such a system the United Kingdom would pay high European prices for their massive agricultural imports, prices which will be at least equal to those of France and possibly even higher (somewhere between French prices and the much higher German prices). To the extent that the United Kingdom are compelled to divert their agricultural purchases to European sources of supply, there will be a large direct loss to the United Kingdom economy because the United Kingdom would, in effect, be subsidizing high-cost European agricultural industry. Even that portion of the United Kingdom requirements which will continue to come from traditional and more efficient suppliers will cost the United Kingdom more because the variable tariff levy they will be required to collect at the border is intended to be used for the purpose of subsidizing the export of European agricultural surpluses (i.e., French, Dutch and Italian surplus production).We have not made an independent estimate of the economic and financial burden which will be imposed on the United Kingdom economy if the United Kingdom should adopt the common agricultural policy as it is shaping up, but we have seen estimates prepared by French officials which run as high as $1 billion to $1¼ billion a year.Trade in Industrial Raw Materials

Ever since the industrial revolution the United Kingdom have imported their raw material requirements from the cheapest sources of supply, duty-free or under very low tariffs. If the United Kingdom were now to adopt the common external tariff of the E.E.C. they would have to impose tariffs against third countries on such products as aluminum, woodpulp, newsprint, lead and zinc. This will result in more diversion of trade in these commodities to higher-cost suppliers located in the Common Market. As in the case of trade in agriculture, discussed earlier, this will impose a real additional economic cost on the United Kingdom economy.Gains from Trade

Popular discussion of the gains to be obtained from international trade often proceeds on the assumption that a dollar’s worth of trade in one direction provides the same benefit as a dollar’s worth of trade in any other direction. This, of course, is not true. Much depends on the nature of the goods which are traded and the degree to which it would cost more in real terms to produce that particular good at home as compared with obtaining that good from abroad. For example, when the United Kingdom trades an Austin motor car in exchange for a ton of aluminum there is a larger economic gain for the United Kingdom than if that Austin motor car were traded for a German Volkswagen or a French Peugeot. This is because the additional cost to the United Kingdom of producing a car equivalent to a Volkswagen at home as compared with importing it is not really very great. Another way of stating the same proposition but in more general terms is to say that trade between countries producing complementary goods is almost certain to produce greater economic benefits for both countries than trade between countries producing directly competitive goods. One of the effects of United Kingdom entry into the Common Market will be to divert trade from its present trading partners to the European Economic Community, which would mean a smaller proportion of trade with countries like Canada and Australia which produce complementary goods, and a higher proportion of trade with countries like Germany and France which produce directly competitive goods.Investment

One of the more persuasive arguments motivating the United Kingdom to join E.E.C. is based on the fear that otherwise new investments, both of United Kingdom capital and capital from abroad, will be attracted into the Common Market countries rather than into the United Kingdom. We have not seen any convincing evidence that this is in fact happening on any significant scale or that where British or other capital has moved into Europe these decisions related to the formation of the Common Market. It is well-known that large investments have been attracted to the United Kingdom over the past thirty years because of the Commonwealth preferential system. To the extent that the Commonwealth trading system is impaired or abandoned as a result of the United Kingdom move into Europe, less capital of that kind will be attracted to the United Kingdom; indeed, there may be some exodus.The assumption that the United Kingdom as a member of the E.E.C. will maintain or increase its share of available investment capital cannot be taken for granted. Within the E.E.C., the United Kingdom will face increased competition in those lines of production in which the United Kingdom now engages, such as engineering, shipbuilding, motor cars, and many lines of consumer goods, from countries with significantly lower wages and weaker trade unions. In these circumstances, and having lost the Commonwealth advantage, it is not at all evident that more investment capital will, on balance, flow into the United Kingdom.Balance of Payments

The United Kingdom are once again facing serious balance of payments difficulties. They may think that membership in the E.E.C. will somehow help to overcome these difficulties. We do not see how membership in the E.E.C. of itself can do anything to help solve the immediate problems. Indeed, if the consequences to their overall trade, costs of obtaining their basic foodstuffs and their raw materials, and on their ability to attract capital are anything like those referred to above, their external financial problems would be exacerbated, not eased. The underlying difficulties in the United Kingdom today relate to excessive home demand, high labour costs, industrial rigidities and perhaps higher social service costs than the economy can afford. As a consequence, imports are excessive and exports are inadequate. These are fundamental difficulties and will require fundamental solutions. We fail to see how removal of United Kingdom tariffs between the United Kingdom and the Six could, in these circumstances, help the United Kingdom achieve a better trading balance. Indeed, if our analysis is correct, it could make for a larger adverse balance.Industrial Efficiency and the United Kingdom’s Competition Position

It has been argued that the United Kingdom needs to be part of a larger market to obtain the economic benefits that flow from large-scale production and increased specialization. This is a highly doubtful proposition. The United Kingdom already has a large home market and large export markets which support large-scale production and a very high degree of industrial specialization. For most industries it can be demonstrated that the United Kingdom markets at home and abroad are already as large as, or larger than is needed for optimum-scale production in individual production units. Accordingly, it cannot be contended that this is a sound reason compelling Britain to join the Common Market.A more convincing argument would be that the lowering of trade barriers and other restrictions in the United Kingdom would, by introducing more competition, force British industry to watch their wage costs, abandon the restrictive practices of labour and management and in general increase their business efficiency. But is it essential to join the Common Market in order to achieve this measure of self-discipline Clearly, if there is merit in this approach it can and should be undertaken by the United Kingdom on their own and for themselves. It can be demonstrated that joining the Common Market may inhibit rather than help this movement, since the Common Market external tariff for many goods that figure prominently in United Kingdom trade will be higher, not lower, than the effective tariff rates imposed by the United Kingdom at the present time.Economic Growth

An important element in the argument of those who favour United Kingdom membership in the E.E.C. is that the Common Market is a dynamic, rapidly growing region and that association with this region would stimulate similar rates of growth in the United Kingdom. The transmission of economic expansion from one region to another occurs essentially through the mechanism of trade and investment. In earlier sections of this memorandum doubts were expressed about the likelihood that United Kingdom trade and investment taken as a whole would expand by virtue of the changes in its position that would flow from joining the E.E.C.In recent years, rates of growth in most countries of the Six have been more rapid than in the United Kingdom, the United States or Canada. The reasons for this are complex but there is little evidence that the decision to form a customs union was an important casual factor. Given the extensive postwar reconstruction programme in Europe together with the extensive financial help received from North America, much of this growth was to be expected in any case. Indeed, the rapid expansion in this region which has been taking place in recent years may be merely the counterpart of very slow growth in earlier years. At different times since the war the United States, Canada, Australia, have experienced more rapid growth than Europe, and there is no reason to assume that variations in the rate of growth between different countries and regions will not favour regions other than Europe in future years. Japan, for example, is today growing more rapidly than any other country in the world, despite the fact that Japan belongs to no customs union, and indeed faces discriminatory trade barriers in many parts of the world. The simple truth of the matter is that the factors that govern rates of growth are complex and not too well understood. Much more work will have to be done before economists are confident that they understand the processes and causes of economic growth. We can be sure, however, that it is an over-simplification to argue that growth automatically flows from participation in larger economic units.Tactical and Bargaining Considerations

The analysis in this memorandum is based on the assumption that if the United Kingdom join the E.E.C. they will have to accept the major provisions of the Rome Treaty as they now stand. The United Kingdom may argue that this analysis is extreme because the United Kingdom have the intention of seeking important exceptions to the present terms. Presumably, it would be the United Kingdom’s hope that such exceptions would be designed to avoid the adverse economic effects referred to in this paper. However, the United Kingdom admit frankly in their memorandum that there is no “halfway house” and that they cannot say with any assurance that such arrangements can be made to protect Commonwealth interests or to defend their own domestic interests. Their memorandum states – but without supporting evidence – that “it is safe to conclude that some arrangements to protect essential Commonwealth interests will be negotiable.” Such advice as we have had, particularly from France, warrants no such conclusion. The United Kingdom, once they decide to negotiate again, can hardly risk a second failure. This in itself puts the United Kingdom in a very weak bargaining position. Moreover, as an applicant country, not equally welcome by all members of the Six, in a weak external financial position, in debt to the European central banks, it seems highly unlikely that the United Kingdom would be able to extract the kind of concessions that would be necessary.It is not to be expected that the points made in this paper will convince the United Kingdom that it is not in their economic interest to join the E.E.C. They have done their own analysis and it is to be assumed that they have come up with other conclusions. We believe that their conclusions may well be wrong and it can do no harm to raise doubts in their mind. This may strengthen their resistance should they decide to enter into negotiations with the Six. Moreover, if we were to fail to make these points at this juncture, it would suggest that we accept the United Kingdom argument that it is in their own best interests to join the Common Market. Once such a case was accepted, the only argument we would be left with is that it is not in the Canadian interest that the United Kingdom should join the E.E.C.; and this is obviously not the kind of argument that would be persuasive for the United Kingdom.

509. D.M.F./Vol. 137

Memorandum by Department of Finance

CONFIDENTIAL [Ottawa, July 1961]

Possible United Kingdom Association with the Eec – Political Implications

The United Kingdom Memorandum to Prime Minister Diefenbaker emphasizes the international political aspects of their relationship with the Six. While it is almost impossible to distinguish clearly between the economic and political considerations at stake for the United Kingdom, Mr. Sandys, during his visit, can be expected to play up the political considerations which, in the view of the United Kingdom Government, impel them to join the Six.

The international advantages of United Kingdom membership in the EEC are by no means obvious. It would, therefore, appear desirable to raise questions about the political arguments Mr. Sandys may put forward. This is the course proposed in the draft Memorandum to Cabinet of June 28, 1961,† and we have accordingly prepared the following questions which might be raised with Mr. Sandys. It might be stressed that while these questions relate to actual membership, most of them also apply to a decision to open negotiations, especially since a decision to start negotiations implies a likelihood of membership.

The main purpose of such questions is to encourage U.K. Ministers to take another hard look at the international considerations involved. It would, therefore, be most desirable that Mr. Sandys should not get the impression that these questions represent mere debating points or that they reflect only narrow Canadian interests. If the questions are to carry conviction and to raise real doubts in the minds of U.K. Ministers about the course which they are contemplating, it would be well to emphasize that they are based on genuine worries and that they are motivated by the regard which Canada has for the role of the United Kingdom in world affairs. If Canada did not attach importance to the international position of the United Kingdom, the easy thing would be simply to accept the U.K.’s first assessment and not bother about the consequences. It is just because Canadians value the part which the United Kingdom is playing that they are deeply troubled about the effects which a mistaken move by the United Kingdom could have. As illustrations of the kinds of good influences which the U.K. has exercised on world events in recent years, and which are highly valued in Canada, some reference might be made to (a) the example which the U.K. has set in bringing so many countries in Asia, Africa (and the Caribbean) to orderly independence; (b) the useful relations which the U.K. has been able to continue maintaining with these newly independent countries; (c) the special regard in which the U.K. is held throughout the world (both in the West and in the East) as a result of “political genius” displayed in these developments; and (d) the moderating influence which the U.K. has been able to exert on East-West tensions generally by its interventions in Washington, Moscow, and Bonn on major issues.The Future of Europe

It might be pointed out that it is not inconsistent to see merit in the present European Economic Community and yet to question the desirability of enlarging it by bringing in the U.K. (and perhaps some of the Scandinavians). A European unit of a certain size may be a good thing. A bigger European unit may be politically bad, for its members and for the rest of the world. The smaller unit may well be big enough to support the long-desired reconciliation between France and Germany while leaving independent and substantial countries outside as a check on some of the possible tendencies of the unit and as a mooring to which some of the countries inside can retain their attachment and thus be better able to preserve their national identities and their independent viewpoints. A bigger unit, embracing the U.K. and virtually all of Western Europe, would tend to submerge the identities of the individual members and would almost inevitably come to be viewed with the deepest suspicion by the Soviet Union or, perhaps, even by the United States. The risks of dangerous tensions might very well be heightened rather than diminished.

Are the U.K. sure that their adherence to the Community would strengthen it and improve the position of individual members? For example, even though the Dutch and Italians appear to desire U.K. accession, would such countries in fact be as independent with the U.K. inside (and subject to the disciplines of the Community) as they are with the U.K. as a nearby and respected friend outside? Would not a larger Community tend to be more monolithic or “one-minded” than even the present Community is likely to become?

Would such an enlarged Community become a neutral “third force” or would it remain permanently allied to the United States? If it is likely to become neutral – sometimes going one way and sometimes the other – where would that leave the United States and the rest of us? If it is certain to remain an ally of the United States, can the Soviets tolerate it? Would not the prospect of such a development tend at least to sharpen differences with the Soviets and lead them to force some of the major issues earlier and more violently than they would otherwise have done?

Can the U.K. be certain which way such an enlarged Community would go? What reasons do the U.K. have for thinking that they can determine its course? Is their judgment about their future influence in such a Community dependent in part on the keeping of special links with Commonwealth countries and with the United States? What are the chances of their being able to keep such special links? How much influence would the U.K. have in the Community if those special links were broken?

Is there not a danger that the United Kingdom would find themselves cut off from their traditional Anglo-American alliance and at the same time be unable to exercise a decisive influence on European policy decisions? If the United Kingdom becomes submerged in Europe and lose their identity, will they have more or less influence on European affairs than they have now? If the members of the European Community do not become wholly submerged but retain their separate identities, what assurance is there that the United Kingdom will be more dominant in European matters than Germany or France, or have more influence than those countries on United States policies?The Effects on NATO

The U.K. Memorandum to the Prime Minister describes (page 2) “the increasingly wide economic and political division in Western Europe” as “liable to create weakness in the Western Alliance.” Would not this reasoning lead one to conclude much more strongly that the “increasingly wide economic and political division” of the North Atlantic area involved in U.K. accession to the EEC would almost certainly “create weakness in the Atlantic Alliance?”

To what extent do the United Kingdom feel that their membership in the EEC club would oblige them to support de Gaulle in NATO? Could failure to do so lead to a serious division within the EEC?

Is there a danger that European consultation could weaken or supplant NATO consultation?

Are they prepared to join de Gaulle in a combined military nuclear programme?

What, if any, effect will there be on defence production sharing with Europe?The Future of the Commonwealth

Do not the United Kingdom think that the Commonwealth would be seriously weakened by the economic consequences of the United Kingdom’s association with Europe and perhaps by the political implications that might be read into such an association (e.g. on the colonial issue)?

Do not the United Kingdom fear that a weakening of the Commonwealth would drive some of the under-developed members closer to the Soviet Union? For example, in view of President Nkrumah’s reported statement that his country would have to leave the Sterling Area if the United Kingdom joined the Common Market without succeeding first in eliminating all discriminatory features from present trading arrangements between European and African countries, and that the effects on the Commonwealth would be disruptive, do the United Kingdom fear that the stabilizing influence of the Commonwealth, particularly in Africa, could be compromised?

To what extent do they think that the EEC (with United Kingdom membership) would really be prepared to take on genuine world-wide responsibilities towards the under-developed countries? Commonwealth countries, like India and Hong Kong, would expect the United Kingdom to press the Six to take more low cost imports. Would the United Kingdom suffer loss of prestige with the under-developed countries if they appear to accept the recent restrictive trade practices of the Six vis-à-vis the under-developed countries?The Future of Cooperation with the United States and Canada

Do the United Kingdom think it would be possible to preserve the special type of consultation and cooperation which has been traditional between the United Kingdom and Canada?

Have the United Kingdom measured, both in political and in economic terms, the possibility that a United Kingdom move into Europe might oblige Canada to pursue a hemispheric policy and much closer relations with the United States?

While the United States administration to date have given full support to the political objectives of the EEC, is there any assurance that this support would be maintained for a broader European arrangement once its impact began to be felt and the various domestic pressures and interests became active? Would it not be disastrous if the enlargement of the European Community led to a revival of protectionism and, perhaps, isolationism in the United States with all the divisive effects that this would have on the free world? Insofar as the U.S. may be inclined to support U.K. accession to the EEC, may they be motivated in some degree by their old desire to see a scrapping of the British preferential system?Major Foreign Policy Issues

On major East-West questions generally, do the U.K. really think that, as an integral part of the European Economic Community (with its own political and economic “dynamic” as the U.K. memorandum notes), they can retain their capacity for independent initiatives in Moscow, Washington, and perhaps, Peking?

If, after United Kingdom association with the European Community, another Congo or Laos situation arises, will the United Kingdom then have more influence than it has had on such issues recently when it has been able to work closely with Commonwealth countries, particularly India?

In view of the imminence of a crisis in Berlin, do not the United Kingdom consider they will have more influence in the right direction now than they would have if they were pledged to an association with the Six?

While the present members of the Common Market have temporarily been able to preserve their separate identities and independent positions on most issues in the United Nations, will that continue to be the case a few years from now when those countries are more fully integrated and if the United Kingdom has joined them? When the integration of the Community is further advanced and if the United Kingdom has joined in, will independent positions on major issues be possible? Even if independence is retained, will other members of the United Nations be prepared to regard the Community members as truly independent? Will not United Kingdom influence in the United Nations be substantially diminished?

510. DEA/8490-B-40

Record of Meeting between Canadian Ministers and Secretary of State for Commonwealth Relations of United Kingdom

SECRET [Ottawa], July 13, 1961

Present

Canada:

The Honourable Donald Fleming, Minister of Finance (in the Chair)

The Honourable Howard Green, Secretary of State for External Affairs

The Honourable George Hees, Minister of Trade and Commerce

The Honourable Alvin Hamilton, Minister of Agriculture

Mr. N.A. Robertson, Under-Secretary of State for External Affairs

Mr. R.B. Bryce, Secretary to the Cabinet

Mr. K.W. Taylor, Deputy Minister of Finance

Mr. S.C. Barry, Deputy Minister of Agriculture

Mr. A.F.W. Plumptre, Assistant Deputy Minister of Finance

Mr. A.E. Ritchie, Assistant Under-Secretary of State for External Affairs

Mr. J.H. Warren, Assistant Deputy Minister of Trade and Commerce

Mr. S.S. Reisman, Assistant Deputy Minister of Finance

Mr. L. Rasminsky, Deputy Governor of the Bank of Canadaand other officials.

United Kingdom:

The Right Honourable Duncan Sandys, Secretary of State for Commonwealth Relations

Mr. K. McGregor, Economic Adviser to the Office of the High Commissioner for the United Kingdomand other officials.

Thursday, July 13, 1961 – 10.00 a.m.

Mr. Fleming welcomed Mr. Sandys and expressed the Canadian Government’s appreciation for this opportunity to explore informally these matters which were of vast importance and concern for the United Kingdom, Canada and the rest of the Commonwealth.

Mr. Sandys stressed that these talks were informal, in keeping with the atmosphere of the Commonwealth. He emphasized that no decision had been taken by the British Government to join the EEC and this was reflected in recent meetings of the United Kingdom Cabinet. His Government appreciated that any decision which might be reached would have profound effects on other members of the Commonwealth, particularly Canada, Australia and New Zealand who had the deepest economic interest and with whom the political links were the closest.

The paper which had been sent to Mr. Diefenbaker recently explained that there were three key factors to be taken into account:

If Britain wanted closer association with the EEC it must be as a full member;

The Six have recognized the importance of the Commonwealth and have indicated their willingness to discuss special arrangements to safeguard vital Commonwealth interests;

Such arrangements cannot be determined in advance but only in the course of negotiations.The question, therefore, before Whitehall was whether the United Kingdom should begin negotiations and not whether they should join. That full membership was a requisite for any association had been proven by the United Kingdom’s earlier experience with the free trade area negotiations and with the attempts to create a bridge between EFTA and the EEC.

Mr. Sandys asked that Canadian Ministers should examine with him the advantages and disadvantages of a United Kingdom move in both political and economic terms and with respect to its effect both on the United Kingdom and on the future of the Commonwealth.Political Aspects

Mr. Sandys emphasized that while the Treaty of Rome was basically an economic treaty it had a political background; political consultation amongst the members would undoubtedly be extended although there were no active plans for a political super-state in Europe, a concept to which de Gaulle was opposed. The EEC would exercise a growing influence on the rest of the world, both politically and economically. If the United Kingdom remained outside, their own influence, which for a variety of factors was greater than its actual size would dictate, would undoubtedly be reduced. There would be an increasing trend for the United States to pay less attention to the United Kingdom and the rest of the Commonwealth and turn more and more to the Six. It was impossible to speculate on what might be the posture of the Six if the United Kingdom stayed out, but there was a real danger that they could develop as a “third force” between communism and the free world which could lead to a weakening of the Western alliance or a revival of the “fortress America” concept.

Mr. Sandys stressed that while the United Kingdom Government and he personally were the strongest supporters of the Commonwealth, it must be recognized that the Commonwealth was not capable of exercising unity or political strength to compare with that of the Six, whether or not the United Kingdom joined.

Mr. Sandys said that the United Kingdom would be giving up an element of sovereignty with respect to certain matters covered by the Rome Treaty in the economic and social sphere, but he was hopeful that the United Kingdom would be able to have considerable influence on the conduct and degree of political coordination in the Community. During the transitional period the rule of unanimity provided an effective safety catch against any unpalatable decisions which might be triggered by the Six. The entry of the United Kingdom would also lead to adjustments in the balance of the present voting pattern and they were confident that even under a system of qualified majority they would be able to exercise a reasonably decisive influence in the outcome of policies in both the economic and political spheres.

Mr. Sandys said that if the United Kingdom stayed out, despite de Gaulle’s opposition, eventually a European federal state would emerge. The United Kingdom was opposed to this objective and together with some of their EFTA partners who would also join they could exercise a restraining influence on any federalist tendency.

Mr. Sandys said that his Government was convinced that membership in the EEC would not be incompatible with membership in the Commonwealth. Other commitments which the United Kingdom (and Canada) had undertaken in NATO, for example, which restrict considerably the political independence of its members, have never been deemed inconsistent with Commonwealth obligations. Indeed, such associations were useful in broadening the sphere of Commonwealth influence, and South Africa was an example of the lonely and uninfluential position in which a country can find itself when it does not have another wide and reasonably diversified circle of friends. He was confident that United Kingdom foreign policy which had always been obliged to take Europe into account would not be altered, and that there was a good chance that they could influence the EEC away from inward-looking continental policies if they join. A closer relationship between the Commonwealth and Europe would be a very good thing. Mr. Sandys summarized briefly the political considerations as follows:

The EEC will become a powerful global economic and political influence whether the United Kingdom is in or out;

If the United Kingdom stays out, her political and economic influence will be reduced with a consequent reduction in the strength of the Commonwealth;

If the United Kingdom join and play a leading role its influence in and out of Europe will increase and make it a more valuable partner in the Commonwealth.

Economic AspectEffects on the United Kingdom

Mr. Sandys said that the United Kingdom was already facing very strong competition for its exports in Europe and in third countries, including the Commonwealth. When the genuine benefits of the large market accrued to the EEC the United Kingdom economic difficulties were certain to increase if it stayed outside. This would affect its ability to absorb imports from the Commonwealth and provide development and investment capital. Restrictions to protect balance of payments could not be ruled out.

Mr. Sandys said that the United Kingdom looked to an expansion of intra-Commonwealth trade but recognized its limitations and that Commonwealth free trade was not practical politics. It was a warning to the United Kingdom Government that its share in Commonwealth markets had declined while its share in European markets had increased.

Mr. Sandys said that there were great uncertainties if the United Kingdom joined the EEC and some British industries would go to the wall. The overriding consideration, however, was the virtual certainty that the United Kingdom would suffer a severe economic decline if it stayed out of Europe.Effects on Commonwealth Trade

Mr. Sandys said that it would not be possible for the United Kingdom to maintain unrestricted free entry for all Commonwealth goods but this did not rule out finding other means of ensuring that the Commonwealth retained outlets in Europe and the United Kingdom on a scale comparable to the present. He did not believe that the Six would oppose special arrangements on simple doctrinaire grounds that they were not permitted in their own treaty; derogations would probably prove possible for a wide range of products. However, the United Kingdom would have a better chance of protecting Commonwealth trade if it said clearly at the outset that it accepted the basic principles of the Rome Treaty and did not propose to water them down. Briefly this meant acceptance of the common internal market, the common agricultural policy and the common external tariff. Within this framework special arrangements could probably be worked out to protect some but not all of the imports from the Commonwealth.The Trade Effect for Canada

Mr. Sandys said that the terms of entry for Canadian foodstuffs which represent about 1/6 of the exports to the United Kingdom would be influenced by the common agricultural policy which had not yet been settled. He was hopeful though that Canadian hard wheat exports would not suffer. The future of barley and apples was less certain but this resulted not from factors connected with the Treaty of Rome but from over-production in Europe and the United Kingdom. For foodstuffs generally he thought duty-free quotas might be a solution.

Mr. Sandys said there were serious problems involved in the establishment of the common agricultural policy and in particular the reconciliation of the support system in the United Kingdom and on the continent. He thought the proposals of the Commission were likely to be hotly contested. The United Kingdom could be counted on to come down in favour of maintaining reasonable access for the traditional agricultural exporters and against any system of self-sufficiency. The common agricultural policy was an important factor in the timing of any decision to negotiate with the Six. The United Kingdom had already let it be known that parallel to their general negotiations to join, the United Kingdom would wish to be associated with the common agricultural talks when they are resumed after the German elections in October.

Mr. Sandys said that there was a reasonable hope that exports of Canadian raw materials could be safeguarded. Copper, nickel and iron ore are already free under the common external tariff and their terms of access would be unaffected. For other products, e.g., asbestos and synthetic rubber, Canada might have to contemplate a loss of preference but would still enjoy free entry. For a third category, including aluminum, wood pulp and lead and zinc, Canada would have to face formally the prospect of the common external tariff but duty-free or very low tariff quotas could probably be arranged.

Mr. Sandys said that there was little prospect for retaining the present terms of access for exports of Canadian manufactured goods which, although they represent only 2% of Canada’s total exports, were still of great importance, particularly with respect to future planning. The only hope here would be to obtain some tariff reduction, probably through GATT, during the transitional period of roughly 10 years.How Would Negotiations Proceed?

Mr. Sandys said that the United Kingdom had been disappointed in its earlier hope that it might be able to learn what special arrangements could be worked out for the Commonwealth before actually entering negotiations with the Six; exploratory talks with the French, Germans and Italians had not been productive. However, in his view, it should not be difficult to work out satisfactory arrangements for a large range of products if the Six genuinely wished the United Kingdom as a member. He emphasized that if the United Kingdom decides to negotiate this did not imply a commitment to join. It had been suggested that once the United Kingdom had entered upon negotiations it would be difficult if not impossible to let them fail. While he did not accept this view, he said that the United Kingdom would have to begin with the intention of bringing the negotiations to a successful conclusion and, therefore, their demands could not be unreasonable. Members of the Six, other than France, were generally favourable to United Kingdom accession. De Gaulle was hesitant for political reasons, but powerful sections of French opinion led by Jean Monet favoured United Kingdom entry. The present threatening atmosphere in the world was also likely to create a helpful political background for the talks with the Six.

Mr. Sandys said that if the United Kingdom decided to negotiate it would wish the Commonwealth to be closely associated with the talks. While it might or might not be possible for Commonwealth countries to be actually at the negotiating table, he hoped that they would work closely together in preparation for the negotiations and in reaching decisions on tactics. At the end of negotiations there would also have to be the closest possible discussion concerning the final decision.

Mr. Sandys said that his Government had an open mind as to how such final consultation should be carried out. Because of the diversity of interests individual consultation was perhaps the most suitable. This did not mean that the United Kingdom objected to collective consultation and they recognized that a collective meeting, particularly to discuss the political effects, might be desirable when the picture was clear, and that this conference might be at the Prime Ministerial level.

Mr. Fleming suggested that the Canadian side would wish to comment after lunch. He suggested, and Mr. Sandys agreed, that during the course of the meetings no comment would be given to the press.Thursday, July 13, 1961 – 2.30 p.m.

Mr. Fleming said that the Commonwealth had been a fundamental factor in the determination of Canada’s external political and economic policy for many years. The enlargement of the Commonwealth in recent years had led to some problems and the fear that the bonds might be weakened. This was not the Canadian view. Its value was reflected in the great importance that the newer members attached to Commonwealth association.

Mr. Fleming said the Canadian Government recognized that while this was a matter for decision by the United Kingdom, Canadian Ministers had been invited to express their views, which he proposed to do in a frank manner. There was grave concern in Canada about the United Kingdom joining the Community. He hoped that the United Kingdom Government would examine both the economic and political factors that gave rise to our concern before going any further in the direction of making a decision.

Mr. Fleming said the present Canadian Government had been deeply conscious over the past four years of the relationship between the United Kingdom’s dilemma over Europe and its Commonwealth obligations. At the Mont Tremblant Conference Mr. Maudling had described the United Kingdom’s approach to the Free Trade Area negotiations and the assurances which he had given to safeguard Commonwealth interests and to exclude food, drink and tobacco had been warmly welcomed. The value of the Commonwealth preferential system had been unanimously reaffirmed at the Montreal Trade and Economic Conference in September 1958.Footnote 27 Mr. Macmillan’s visit to Canada in that same year had led to a repetition of these assurances as well as further understanding of the principle of interdependence.Footnote 28 When the breakdown in the Free Trade Area negotiations in Paris came in December 1958 to Canada’s great regret, it had serious repercussions and it led many, including Canada, to question whether or not the United Kingdom might have over-estimated the strength of its bargaining position at that time and may be doing so again today.

Mr. Fleming said that the Canadian Government had been conscious of the need to minimize the disruptive effect of any division of Free Europe between the Six and EFTA and had played an active role in creating with the OECD an atmosphere which would contribute to better understanding between the two groups. However, he felt that statements which Mr. Sandys had made this morning about the United Kingdom’s intention to safeguard Commonwealth interests would have to be qualified by these doubts about the strength of their bargaining position.

Mr. Fleming questioned whether, in fact, the situation was as urgent as Mr. Sandys had suggested. Real harm might be done by moving too quickly. He hoped that he was not presumptuous in expressing the hope that the United Kingdom’s concern over the immediate prospects of its economic situation would not lead them to take precipitate action on a matter having such long-term consequences.

Mr. Fleming said that Canadian Ministers could not share the gloomy view of Mr. Sandys about the possibilities for expanding trade under existing arrangements.

He would like to know more about the attitude of the United Kingdom public, particularly with respect to the agricultural arrangements.

He also questioned whether it would not prove more difficult than Mr. Sandys had suggested to reach agreement with the Six on special arrangements to safeguard Commonwealth interests. The position of de Gaulle would suggest that there would be little inclination on the part of the French to consider special arrangements which could offer genuine guarantees for Commonwealth trading interests. Recent statements by other leaders in the Six, including Professor Hallstein, the President of the Commission, emphasized the unwillingness of the Six to deviate from the course on which they were now embarked.

Mr. Fleming asked Mr. Sandys whether if the Six had made such broad strides politically towards unity it would be reasonable to expect that the United Kingdom, if it entered, could turn back the tide that was now flowing towards closer political coordination and consultation. It would be reasonable to expect that the Six might insist on political concessions from the United Kingdom as well as economic concessions. The Canadian experience with the Six in negotiations at Geneva had proven that they are very effective in using their collective bargaining power.

Mr. Fleming said that at the meeting in September 1960 of Commonwealth Finance Ministers in London, virtually all the Commonwealth countries had expressed deep concern to Mr. Heath about the effects of the United Kingdom joining the EEC. In present circumstances the Canadian Government would consider that a plenary meeting of the Commonwealth would be the most useful way in which to consult on this very vital issue which had such disturbing political and economic overtones.

Mr. Fleming said the position of the United States would have to be recognized. For political reasons the Administration appeared to support the EEC, but it must be remembered that the United States had always been critical of the Commonwealth preferential system.

Mr. Fleming referred to his own statement to the press in London in September 1960 that any loss of the economic advantages for Canada in the United Kingdom market for which there had been payment through reciprocal concessions in the Canadian market would necessarily lead Canadians to question whether they could continue to maintain the advantages offered to the United Kingdom in the Canadian market. It could lead Canadians to look on an increasing scale to the United States as a market. Any weakening of the Commonwealth would also reinforce the strong economic and political pulls to the South which already existed. There was also a danger that an enlarged European Community which did not pursue outward-looking policies would greatly encourage the growing protectionist tendencies in the United States Congress.

Mr. Fleming said that while Mr. Sandys had reassured the meeting that no decision had been taken by the United Kingdom Government, it was the view of Canadian Ministers that the United Kingdom Government were much closer to this decision than the Canadian Government had expected. It would be virtually impossible for the United Kingdom to embark on negotiations and later to break them off. Such a course would lead to the most far-reaching and dangerous consequences. These were so far-reaching, in fact, that he questioned whether the lack of clear advantage which might result from United Kingdom membership warranted their taking such a great risk.

Mr. Fleming said he doubted that the United Kingdom Government would be able to influence the EEC effectively without losing a good deal of political freedom of action. It would hardly be possible for the United Kingdom to exercise a strong influence within the EEC and at the same time to retain its influence within the Commonwealth.

Mr. Fleming said that he had noted Mr. Sandys’ statement that the United Kingdom Government wished to keep in touch individually with Commonwealth Governments at all stages and that they had no fixed ideas as to collective discussion. It was the Canadian view that this subject should be carefully reviewed collectively before the United Kingdom takes a decision even to negotiate.

Mr. Hees said that he had doubts in his mind about the trade and economic advantages for the United Kingdom. There was no doubt in his mind that this would have a serious and adverse affect on Canadian trade.

While he appreciated that the United Kingdom were attracted by the dynamic structure of the EEC, only 14% of United Kingdom exports went to that market as opposed to roughly 40% which were absorbed in Commonwealth markets. A substantial increase in exports to Europe could be more than offset by a decline in United Kingdom sales to the Commonwealth.

Mr. Hees asked Mr. Sandys how the United Kingdom could reconcile improving its competitive position in the export market when they might be obliged to accept higher tariffs for raw materials and foodstuffs. In his view the United Kingdom already possessed a large market and that this, coupled with their markets abroad, should make them capable of meeting any challenges. In concentrating their economic ties on Europe they were joining themselves to a group which was competitive rather than complementary as with the Commonwealth. He firmly hoped that the United Kingdom Government would take these and other factors into account in reaching a decision whether to negotiate.

Mr. Hees emphasized the importance of the United Kingdom market for Canadian trade and, in particular, for manufactured goods where postwar restrictions, which had neutralized preferences, had only recently been removed. He said that out of total sales last year of $915 million, $691 million, or 76%, would be affected by the United Kingdom acceptance of the Common Market tariff. $631 million would, in our view, be seriously affected. $584 million of this trade would be faced with higher tariffs. $553 million would be faced with not only a loss of preference but, in most cases, a preference against Canadians and in favour of Europeans. This would be entirely new and a seriously disturbing situation.

Mr. Hees said that the statistics could not be the full measure of the damage for Canada. Loss of preferences for our manufactures would lead to serious reactions in Canada where grave employment problems exist. There was no substitute for the existing terms of access to the United Kingdom market.

Mr. Hees referred to the types of safeguards which Mr. Sandys in his statement in the morning had said there might be hope for reaching an agreement with the Six. But even these so-called safeguards, whose acceptance by the Six was questionable, would not be adequate in Canadian minds.

Mr. Hees emphasized that preferences were a basic element contributing to the close links of the Commonwealth. If the United Kingdom joined the EEC Canadian trade would be exposed to extensive and irreparable damage affecting all the main sectors of the economy.

Mr. Green said that he, like Mr. Sandys, recognized the strong political content of the Rome Treaty. He was worried about Mr. Sandys’ reference to the “coordination” of views within the Six, and particularly the tendency, which is already apparent, to coordinate on NATO matters. This was contrary to the spirit of the Alliance. Canada had objected earlier to the United States, the United Kingdom and France (and sometimes Germany) attempting to set policies for NATO. This tendency would be increased if the United Kingdom joined the Six. He was also concerned about the creation of a third massive nuclear power. That was not the way to prevent war and keep the peace. Contrary to the worry of Mr. Sandys about what would happen to United Kingdom influence if they did not join the EEC, he felt that United Kingdom influence would grow as the leader of a vigorous Commonwealth. Combining with Germany and Italy was not a substitute for the Commonwealth link.

Mr. Green questioned whether the United Kingdom (or the Commonwealth) would be able to exercise effective leadership in the Six. He wasn’t sure whether Mr. Sandys contemplated the Commonwealth joining (or at least controlling) the Six or the other way round. The United Kingdom seemed to be counting heavily on things changing after the departure of de Gaulle and Adenauer. The fact was, however, that de Gaulle, and not his successor, would set the terms of entry for the United Kingdom and would not leave much scope for the United Kingdom to gain excessive influence.

Mr. Green said that this move could endanger the important links which the United Kingdom retained with its former colonies in the Commonwealth. Britain had a great record in bringing countries to independence and she was held in high regard throughout the world. She had more influence than Mr. Sandys seemed to admit. Her influence would be lessened rather than increased if she joined the Six. Mr. Green questioned whether the United Kingdom, as a member of the Common Market, could exercise as much influence in the East-West struggle, and in particular on such specific and grave issues as Berlin.

Mr. Green said he had great difficulty in understanding how the United Kingdom thought they could reconcile Commonwealth and EEC interests. Canada and other Commonwealth countries recognize the leading place of the United Kingdom in the Commonwealth at present. They could not agree, however, that the United Kingdom might speak for the Commonwealth within the EEC if she became a member.

Mr. Green said he doubted that the United Kingdom staying out of the EEC would increase the likelihood of the United States withdrawing its armed forces from Europe. It might well work the other way round.

Mr. Green said that, as Mr. Sandys had recognized this morning, the present situation was fraught with uncertainties. It would be a tragedy if the Commonwealth were weakened at this time when it could contribute so greatly to world peace. He realized what a difficult decision now faced the United Kingdom, but on the basis of what had been said by Mr. Sandys this morning he thought it would be a serious mistake for the United Kingdom to enter into negotiations with the Six.

Mr. Hamilton said that his Department had been studying closely the changing patterns in agriculture in the United Kingdom and Europe and he was aware, for example, that they were now self-sufficient in barley. By 1965 Europe would probably be self-sufficient generally. At this stage it was impossible to determine what policies Europe would pursue, but Canadians had no illusions about the future. They were prepared to face tariff barriers, but to be clearly excluded would be seriously damaging for Canadian agriculture. In his view, France had the ability to grow more wheat and that in the near future the rest of the Six and the United Kingdom, if it decided to join, would be obliged to accept this, even though it meant poorer bread and higher prices.

Mr. Hamilton said that the loss which the Canadian farmer had suffered as a result of the special pricing arrangements in the 1946 wheat agreement with the United Kingdom is proof of Canada’s warm feelings about the Commonwealth and the United Kingdom in particular. Canada had also exercised a policy of restraint in disposing of its butter surplus because of the possible disruptive effect it might have on other Commonwealth countries.

Mr. Hamilton said that Canada shared a common aspiration with a number of other Commonwealth countries in that she did not wish to be a mere supplier of raw materials, but wished to develop her own industries. It was appreciated that other more highly industrialized countries might be in a position to concentrate more effectively on manufacturing, but the development of secondary industries was also essential for the development of the Canadian economy.

Mr. Hamilton said that the role of leadership which the United Kingdom exercised with the English-speaking people of the world was of great importance and he sincerely was concerned that the United Kingdom might lose this position if they joined Europe.

Mr. Sandys said that it was his impression that the Canadian Ministers had rejected in large part the United Kingdom thesis, as he had put it forward in the morning. There was plenty of room for two opinions on this matter and there were undoubtedly uncertainties about the effects both on trade and on political alignments. The United Kingdom was pessimistic about its export possibilities if it did not improve its competitive position vis-à-vis the Six. They would be most anxious to explore means of expanding Commonwealth trade but they were not aware of any concrete possibilities and therefore they had little choice but to examine the possibility of an association with Europe.

Mr. Sandys said that while he had doubts in his mind about what the economic effects would be, he did not share these uncertainties about the political effects of the United Kingdom joining the Six. He did not think they would be faced with a serious dilemma over a federal state in Europe and he thought that the United Kingdom would be able to exercise considerable leadership in the European Community. This leadership would be consistent with and would indeed strengthen their contribution to the Commonwealth.

Mr. Sandys said that the United Kingdom were looking at this move from a long-term point of view. The real danger to security would eventually come from China when it developed as a nuclear, industrialized state. In these circumstances, some move towards world government was essential if the West was to survive and the present arrangement with the Six might be the first step towards an Atlantic Community or even a wider political association amongst like-minded nations.

Mr. Sandys emphasized again the importance his Government attached to the Commonwealth association. He cited the achievement at the last conference of Prime Ministers in reaching agreement on a common approach on disarmament.

Mr. Sandys, in reply to an enquiry from Mr. Green, said that he doubted that there was widespread opposition in the rest of the Commonwealth to a move by the United Kingdom towards Europe. Such opposition as was emerging in countries like Ghana was based on considerations other than an attachment to the Commonwealth.

Mr. Hees asked how it would be possible for the Commonwealth to continue on its present basis in view of the trade adjustments which might be anticipated. He thought that all countries in the Commonwealth would be adversely affected. The attitude of the Canadian public and its goodwill towards the United Kingdom in particular might be affected by such a move.

Mr. Sandys said that because his Government attach such importance to the Commonwealth they would forego an arrangement with Europe even if it appeared to be in the United Kingdom interest if it became apparent that they would be unable to secure reasonable safeguards for Commonwealth interests. He asked that care should be taken to avoid giving any public impression that the United Kingdom was lukewarm to the Commonwealth.

Mr. Fleming suggested that widespread development of regional trading blocs posed a challenge to the principle of multilateralism for which Canada and the United Kingdom had worked together since the end of the war. It would be a tragedy if this spirit was compromised, and if the United Kingdom was associated with such a compromise he thought the effects on world opinion would be very serious.

Mr. Fleming agreed with Mr. Sandys that further meetings might be of a smaller and less formal nature and that some consideration would have to be given now to the preparation of a communiqué. The meeting adjourned.

511. DEA/12447-40

Memorandum of Conversation between Prime Minister and Secretary of State for Commonwealth Relations of United Kingdom

SECRET Ottawa, July 14, 1961

The interview was held yesterday morning at 11.00 o’clock. We had a most congenial discussion.I pointed out the dangers of the United Kingdom entering the Common Market, (1) politically, (2) economically.As to the first, I underlined the effects it will have on the Commonwealth. When he asked me for particulars and why that should be so in view of the fact that the United Kingdom and Canada were in NATO, the defensive organization, which was not looked on with favour by member countries such as India, I told him I was unable to do more than say that that was my feeling and it might be emotional as I had a deep attachment to the Commonwealth.He frankly stated that a similar view was expressed by Mr. Menzies, to which I replied that his views were significant in that he had generally supported whatever stand was made by the United Kingdom.I told him these discussions taking place with the Canadian Ministers were not to be considered as consultation but were designed to secure the British views on the subject and that I believed this matter could have been settled through a Prime Ministers’ Conference and in a way that would have been beneficial for all concerned.He said the Prime Ministers’ Conference had not been ruled out to which I replied that Prime Minister Macmillan’s statement in the House of Commons two days ago indicated that the United Kingdom Government had turned down the suggestion of such a conference.He stated that having considered all of the factors, including the danger to the Government of having the agricultural ridings which are represented in general by Conservative Members, to the fact that some British businesses will fold up, the considered view of the British Government was that if Britain does not enter the Common Market it will not only lose that market but will be unable to compete in other parts of the world, as the nations joined together in the Common Market will be able to reduce their costs of production as their industries will be geared to the demands of 170 million people. To put it another way, the mass production created by that large market will reduce the costs of production so that the United Kingdom with a market of only 50 million people will not be able to compete.I frankly told him that we did not want to be placed in the position of a dog in the manger, and that the United Kingdom had the right to decide its course – a right which all of the members of the Commonwealth assert as a principle – but that if Britain joined the Common Market Canada and Australia would be driven into closer relations with the United States.When I informed him that the United States was endeavouring to “push” the United Kingdom into the Common Market he disagreed with my conclusion and said that he knew that view was held but that it was not borne out by the facts, and the United States had done nothing to induce the United Kingdom to join and it was only after requests that the United States endeavoured to have President de Gaulle agree that insofar as agricultural products are concerned that the Treaty of Rome should be abrogated to the extent necessary to preserve for the Commonwealth countries their favoured rights of export of these products into the United Kingdom.In a passing reference he stated that President de Gaulle felt that he wanted to restore the days of the Louis of France and to occupy Versailles Palace but did not want to invite Marlborough to dinner.I pointed out that there was nothing to protect our wheat market which was most important to Canada to which he replied that to join the Common Market would not change the eating habits of the English people.Footnote 29

J.G. D[IEFENBAKER]

512. J.G.D./MG01/XII/A/330

Secretary of State for Commonwealth Relations of United Kingdom to Prime Minister

PERSONAL AND CONFIDENTIAL. Lac Ouimet, July 17, 1961

My dear Prime Minister,This is just a line to tell you how glad I was to have the opportunity for such a good talk with you. I was greatly interested by what you said to me. I also wish to thank you for the pleasant lunch party, which I much enjoyed.I can assure you that I fully understand the anxieties you feel about the possible consequences should Britain join the Common Market and the thoughts which underlie them.As you realise, we have a very crucial decision to make – perhaps one of the most difficult we have ever made in our long history. We too have many doubts and anxieties. But for us, unfortunately, there is no way of “playing it safe.” We have to choose one road or the other; there is no middle course.We clearly cannot put off a decision much longer. What our conclusion will be, I honestly cannot say; but you may be sure that, in coming to it, we shall give much weight to the views which you have expressed.

At his request I spent some time at his office with Duncan Sandys today. He reported on some of the details of his visit to Ottawa, and expressed great satisfaction with his meeting with you. Having regard to our conversation by phone, I was interested in the fact that he again reverted to the proposition that British association with the Common Market involved no repeat no political commitments. I pointed out that this was directly contrary to the statements made publicly by Mr. Macmillan, Mr. Maudling, Mr. Watkinson and several other members of British Government.

He attempted to draw a parallel between NATO and the Common Market to support his claim that an arrangement of this kind could be made without political commitment. I suggested that if NATO were to be used as an example, then it should be remembered that NATO was based primarily on the strength of USA, and that if the same reasoning were to be followed then instead of being advised by USA to join the Common Market they should be urging USA to exercise their own influence on Europe by making the first move toward the Common Market.

I confess that I got no repeat no very satisfactory answers because he has a habit of backing away from any positive statement and introducing some new angle.

Our conversation covered a wide field. He asked me what I thought Canada would do if they went in with the Common Market. Just to give him something to think about, I asked him if he remembered the reciprocity treaty of 1911. I said that of course I was drawing no repeat no parallel but recalled the events. As he asked me twice afterwards for Champ Clark’s name, I think it has left him with something to think about.

The only really important part of our conversation, and I regard it as being of very great importance, was the following. He said positively that at the daily Cabinet meetings they are discussing nothing repeat nothing but the Common Market. He mentioned that they are meeting again this afternoon and again on Monday.

He said “The Prime Minister must of course make a definite statement a week from Monday. We have one of three choices. He must announce that we are opening negotiations with the Six, that we have decided not repeat not to approach the Common Market, or that we have not repeat not yet reached any decision.” He said that he thought the last was an unlikely choice as there is such an increasing demand from the people in this country for some definite statement.

His conversation left little doubt that his own mind was made up that there should be a definite statement that they were going to enter into negotiations. This was supported by some rather wide-ranging observations on the necessity for world government before too long and the fact that we must take what intermediate steps are required without delay. All this would have had no repeat no meaning except to support an argument in favour of negotiations.

I expressed some surprise that they were considering a decision to enter into negotiations at this stage as I had understood that Macmillan had given a firm assurance that there would be no repeat no decision to enter into negotiations until there had been full and effective consultations with the members of Commonwealth. He indicated that he thought his visit and that of the other salesmen met with this requirement. I pointed out that on more than one occasion you had stated that his visit was only regarded as a preliminary discussion. He made no repeat no comment on that remark but simply repeated that they must come to a decision so that Macmillan could make a firm announcement a week from Monday (July 31).

It is my understanding from other government sources that they think a decision to start negotiations will be announced by Macmillan on July 31, and that he will be sending a message to you early next week seeking a reply which will indicate that you have no repeat no objection to this course even if you do not repeat not openly express approval.

If such a message is received may I suggest that in the light of your own earlier statements and Macmillan’s statements in the House about full and effective consultation, it might be appropriate to state in the firmest terms your own concern about a course which seems to be contrary to your understanding and can have such far-reaching consequences on the future of Commonwealth.

You might wish to consider the advisibility of pointing out that while the decision as to what they do is of course the responsibility of the Government of UK, nevertheless the course you will be called upon to follow will equally be your responsibility and the effect on the future of Commonwealth is not repeat not something which can be divorced from the decision made by any Commonwealth Government.

I did ask Sandys whether he thought the present situation in Tunisia was one which could be completely disregarded in considering the political implications of association in the Common Market under a Commission which could determine so many of the activities of member states. I found it difficult to understand his reply that this had no repeat no bearing on the subject, particularly with the announcement this afternoon that Bourghiba has seized French pipelines from Sahara. I must admit that I find it difficult to understand why it is particularly attractive to Britain to become so closely integrated with France and Germany when there are such critical developments in both countries which can hardly be separated from the decisions which would be made egarding the industrial and economic activities of the countries concerned.

From what I hear I am fairly confident that if the decision is to go ahead with negotiations, you will be asked for your approval in a message from Macmillan which is likely to refer to the statement in the communiquéFootnote 30 that this is a decision which must be made by the Government of United Kingdom.

It may be important that only today Ted Hill, the Head of the TUC and several other important labour leaders have joined in a statement firmly opposing Britain joining the Common Market. This combined with the statements by the farmers union and the federation of British industries creates an atmosphere in which a firm statement from you may be decisive.

[GEORGE] DREW

514. DEA/12447-40

Secretary of State for Commonwealth Relations of United Kingdom to High Commissioner in United Kingdom

TOP SECRET AND PERSONAL London, July 27, 1961

My dear George [Drew],I am sending you, for your strictly confidential information, the attached copy of a personal message which Mr. Macmillan has sent to Mr. Diefenbaker about the Common Market.You will, of course, understand the extremely delicate nature of this message. I should therefore be grateful if you would make a point of keeping it entirely to yourself until the announcement is made in the House on Monday.

Yours ever,DUNCAN [SANDYS]

[ENCLOSURE]

Prime Minister of United Kingdom to Prime Minister

We have in the last few days been considering in Cabinet our policy towards the European Economic Community. We have in particular given the closest attention to the reports which Duncan Sandys and my other colleagues have made on the discussions which they have had in Commonwealth capitals. These have given us a very clear picture of Commonwealth views on this difficult and complex issue.

I am now sending you this message to let you know that after weighing all the considerations, and taking fully into account the views expressed to us by Commonwealth Governments, we have reached the conclusion that the right course is to seek to enter into negotiations with the Six. I shall be making a statement in the House of Commons on Monday, 31st July, to announce our intentions; I must naturally ask you to keep this decision strictly confidential until that statement is made. We have not yet decided on the exact terms in which our decision will be presented, which is of course a matter of some importance, and I hope to send you a further message on this at the end of the week.

In his discussions with you and your colleagues Duncan Sandys explained what a crucial decision in terms of Britain’s future this is. He also explained to you the political and economic considerations that have increasingly drawn us towards the conclusion that we should seek negotiations with the European Economic Community with a view to joining if satisfactory terms and conditions of membership can be secured. I will not got over this ground again except to say that the economic arguments are given emphasis by the long-term dangers for the British economy which were explained by the Chancellor of the Exchequer in our House of Commons on July 25th.

You and other Commonwealth Governments have recognised that this is a decision which is of cardinal importance for Britain and which the British Government alone can take.

At the same time, we naturally realise that, to a greater or less extent, the interests of all other Commonwealth countries are affected, and we are very conscious of the concern they feel about the possible consequences for them of our joining the Community. These naturally vary in nature and degree from country to country; but it is clear that a substantial volume of Commonwealth trade, in some cases of vital importance to the economies of individual countries, would be at risk if we were to join the E.E.C. without securing adequate safeguards.

My colleagues have had useful discussions with your Government and the other Commonwealth Governments about which of the essential items of this trade would be endangered and, in a general way, about possible methods of protecting them if we were to join the Community. But it is only through negotiations that we can find out what special arrangements can be secured.

We have pondered deeply over the views that you and other Commonwealth Governments have expressed about the possible political consequences of our joining the Community. We are here dealing with matters which cannot be clearly and precisely gauged in the same way as trading interests. Any assessment of the way in which our membership of the Community might affect the political future of Britain or the political cohesion of the Commonwealth involves taking a view, which must necessarily be speculative, about how the Community will develop over the years. And any estimate of how the Community might develop with ourselves as a member has to be matched (as also in the general economic context) against an estimate of how it might develop without us. This comparison depends in its turn on a judgment of what our say would be in the affairs of the Community if we were a member, and of how far, therefore, we could hope to influence the policies of the other European countries in the directions which the Commonwealth would wish. And finally we must set all these considerations against the background of possible changes of a profound nature in the international scene as a whole. It is natural enough that, with all these imponderables, we should take differing views on how the future might develop. I can only repeat what Duncan Sandys said to you: that we should not be applying to join if we did not believe that within the Community we should be able to continue to play our full part in maintaining and developing the Commonwealth association, and to do so more effectively than if we remained outside it.

The Bonn communiqué of 18th JulyFootnote 31 has made clear both that the Six intend to formalise their co-operation on political questions, and also that there is no agreed view yet on how this should be done. This seems to us an additional argument for getting into the Community in time to influence these developments in a healthy direction.

Duncan Sandys has explained to you our intentions as regards Commonwealth consultation in relations to these negotiations. We should wish to have further consultations before the substantive negotiations start and compare notes on how we should handle the subjects in which you have a particular interest. We would then wish to make arrangements for close contact during the negotiations. When the time-table is clearer, we shall be sending you more precise proposals on these matters.

We shall be having a debate in the House of Commons on this subject on August 2nd and 3rd. In the debate we shall expound the considerations which have guided us to the decision we have taken.

[HAROLD MACMILLAN]

515. DEA/12447-40

Memorandum from Head, Economic (1) Division, to Under-Secretary of State for External Affairs

SECRET [Ottawa], August 3, 1961

The United Kingdom and the Six

An informal interdepartmental meeting called by Mr. Ritchie was held yesterday to discuss some of the issues raised by the United Kingdom’s decision to initiate negotiations with The Six. In addition to Mr. Ritchie, Mr. Plumptre, Mr. Reisman, Mr. Shefrin, Mr. Campbell Smith and a few other officials of Finance, Trade and Commerce, External and the Bank of Canada were present. The following is a summary of the conclusions reached on the questions discussed at this meeting.

Timing and Location of Negotiations between the United Kingdom and the EECIn the light of the information available on the proposed timing and location of these negotiations, it was agreed that for planning purposes we should assume that they will start on October 1 in Brussels.It was also agreed that Canada House in London should be asked to keep us informed of any development regarding timing and location.

Further Collective Commonwealth Consultations in the near Future; Role of the Commonwealth Economic Consultative Meeting in Accra on September 12The following questions were considered: Should there be special Commonwealth consultations before negotiations begin between the United Kingdom and The Six? Will the issues raised by the United Kingdom’s decision to negotiate be discussed at Accra? If so, what position should Canadian Ministers take?It was felt that collective Commonwealth consultations could essentially be addressed to two issues: whether the United Kingdom should initiate negotiations and whether negotiations, once they had reached a critical phase, should be broken off. The first had already been dealt away with. It seems that collective Commonwealth consultations of the kind envisaged by Mr. Diefenbaker would be most appropriate when the second issue came to the force. However, it seemed desirable to maintain Commonwealth pressure on the United Kingdom in the meantime and this could be achieved at the meeting in Accra.It was suggested that in making recommendations to Canadian Ministers on the attitude to be taken in Commonwealth consultations, two possible developments should be taken into account: If the negotiations reached a critical stage, which seemed likely, the political consequences in Europe of a break-off would be much more serious than they would have been if the United Kingdom had decided not to negotiate. Moreover, several Commonwealth countries could conceivably consider, when this critical phase was reached, that their interests were adequately safeguarded. Thus, the Commonwealth would not necessarily present a common front and Canada might be isolated. These considerations suggested that perhaps less emphasis should be given to the arguments relating to the disruptive effects on the Commonwealth of a United Kingdom move into Europe.It was agreed that officials should recommend to Ministers that no other collective Commonwealth consultations should be proposed at this stage beyond the meeting already planned at Accra; they should also recommend that at Accra Canadian Ministers should reiterate their concerns over a United Kingdom move into Europe.Footnote 32 At the same time Canadian Ministers should be made aware of the more serious consequences which a United Kingdom decision to break off negotiations could be expected to have in Europe and of the possible lack of unanimity in the Commonwealth on this issue.

Further Bilateral Consultations between Canada and the United Kingdom before the Beginning of European NegotiationsIt was agreed that as soon as possible a letter to Mr. Macmillan should be drafted for the Prime Minister’s signature. This letter would state our understanding of the United Kingdom’s present position, recall Canadian misgivings about a United Kingdom move into Europe, state the terms which are regarded as necessary for the safeguard of our interests, broadly speaking, the maintenance of free entry into the United Kingdom market, where we presently enjoy it (ref.: first positions indicated in Trade and Commerce memorandum of June 27 entitled “Suggested Canadian Attitude”).† This letter would also refer to the traditional trade arrangements between the United Kingdom and Canada and to our rights under the 1947 Exchange of Letters,Footnote 33 and express along the line of the Prime Minister’s statement of July 31,Footnote 34 our desire to be kept in close consultation.Footnote 35The chief purpose of this letter would be to place our requests before the United Kingdom at an early stage of their preparation for their negotiations with The Six.There was some preliminary discussion of the course bilateral consultations with the United Kingdom might take. It was pointed out that although our opening position would probably prove impossible to maintain, it already meant a substantial concession to the United Kingdom since Canada under it would be giving up its preferential position in the United Kingdom market in favour of The Six.

Special Consultations with Australia and New Zealand before or during the United Kingdom-European NegotiationsIt was agreed that Canada should propose to Australia and New Zealand an exchange of views on positions to be taken at the Accra meeting and on specific commodity problems of interest to these countries. We would express our readiness to carry out this exchange by telegram and to meet Australian and New Zealand officials here on their way to Accra, if they found it possible to come to Ottawa, or en route for Accra in London, or in Accra itself around the time of the Commonwealth Economic Consultative council meeting.(Possible consultations with the U.S.A. were not discussed.)

Canadian Attitude towards United Kingdom-European Negotiations, Aloofness or Participation in some DegreeIt was agreed that Ministers should be advised against Canadian participation at the negotiating table. Canada’s presence at the table would not appear to be necessary to press the positions which would safeguard our interests. We had no contractual rights which would clearly justify our presence at the table. Moreover, if the United Kingdom-Six negotiations gave us some scope for reducing United Kingdom preference in the Canadian market, we should probably wish to use this scope chiefly in negotiations with the U.S.A. – not The Six. We should not sit at the table unless the United States were present.Footnote 36Australia and New Zealand were in a different position. Australia had contractual rights with the United Kingdom and for both their alternative market was in Europe. It was agreed that the difference between the position of Canada on the one hand and of New Zealand and Australia on the other should be explained to Ministers.This recommendation on Canadian participation in the negotiations should, however, be revised if a considerable number of Commonwealth countries asked to sit at the table.It was also agreed that our Mission in Brussels should nonetheless be strengthened by the addition of two or three fairly senior officials who would be available in Brussels at least from time to time to follow developments in the negotiations, consult with United Kingdom negotiators at a senior level if the need arose, provide advice to Ottawa and, on instruction, be able to convey the views of the Canadian Government.Footnote 37

Effect on GATT Tariff NegotiationsThe consensus of the meeting was that the United Kingdom’s attitude towards these negotiations could be regarded as the test of the seriousness they attached to their forthcoming negotiations with The Six. The United Kingdom could probably be expected to lose interest in the Dillon round except in so far as the Dillon negotiations provided an opportunity for lowering common tariff rates on items where a high common tariff would give rise to difficulties in their negotiations with The Six.It is intended that within the next few days a draft letter to Mr. Macmillan will be prepared along the lines indicated above, together with a covering memorandum to the Cabinet containing the recommendations also stated above.

M.A. CROWE

516. DEA/12447-40

High Commissioner in United Kingdom to Secretary of State for External Affairs

Although we expect that you have already been approached by Earnscliffe, the following for the record is text of a letter received yesterday from Belcher, Assistant Under Secretary in CRO. Similar letters have been sent, as far as we can determine, to all our Commonwealth colleagues.Text Begins:

I am writing to let you know that we instructed our High Commissioner over the weekend to explain to your government the timetable we were at present expecting would be followed for the negotiations with the Six countries of EEC (on the assumption that our proposal for negotiations is accepted by them) and to ask what the wishes of your government were about the consultations we wished to have with them negotiations begin.

We think it probable that the negotiations with the Six would start in the course of October. We shall not repeat not know more precisely than this for some time, but are meanwhile proceeding with our preparatory work here on this assumption, and we expect to be ready for consultations with other Commonwealth governments in the second half of September.

There seem to us to be two ways of organizing consultations on the problems of concern to other Commonwealth governments, namely either (a) through designated officers in London (either from Commonwealth Houses or to be sent specially to London) whom we could consult both individually and in groups (e.g. on commodities of interest to several countries), or (b) through our own high commissioners in Commonwealth capitals. We recognize that some governments may prefer the first procedure while others will prefer the second; we do not repeat not think it necessary that procedure should be uniform, and we should be happy to fit in with the wishes of each government. Our High Commissioner has been asked to explain this to your government and to ask them to let us know what their views would be. He has been asked to say that, if they should prefer consultations in London, we propose that they should take place from Monday the 18 September, when we ourselves hope to have completed the necessary preliminary work.

We do not repeat not yet know where the formal negotiations with the Six would take place, but we have been giving some thought to the most appropriate method of ensuring close day-to-day consultations with Commonwealth governments when they begin.We believe that some Commonwealth governments will wish to have special representatives at the seat of negotiations to work closely with UK Delegation there. If so, or if they should wish to send representatives specially when some matter of particular importance to them is under negotiation, our delegation will of course be glad to make arrangements for regular consultation with these representatives. Other governments may not repeat not think it necessary or find it practicable to do this, and may prefer to designate representatives in London who would be available for individual or collective discussions with officials here who will be handling the negotiations at this end. Our High Commissioner has been asked to ascertain from your government what arrangements they would wish to make. Text Ends.

When we spoke to Belcher later he was not repeat not prepared to add anything significant to what was contained in the letter. He maintained that little thought had been given to how possible consultations in London may be organized and said that the purpose of the letter was merely to indicate UK officials would be “at home” on and after September 8. Later, however, he said that their preference would be for a series of working party studies of particular commodities rather than a more general CECC type meeting of officials.

From discussions we have had with other Commonwealth representatives, we think there is likely to be pretty general preference for course (a) of consultations in London rather than in other Commonwealth capitals. We have had several enquiries, however, as to the likely Canadian response and we should therefore be grateful if you would keep us in touch with your thinking as it develops and inform us of any reply you give to Earnscliffe.

517. DEA/12447-40

Memorandum from Special Assistant, Office of Secretary of State for External Affairs, to Under-Secretary of State for External Affairs

Possible United Kingdom Association with the Six, Further Consultations with the United Kingdom

Cabinet today considered the Memorandum to Cabinet under reference, and while the proposed reply to the United Kingdom High CommissionerFootnote 38 was approved, certain features of the Memorandum, setting out the conditions under which Canadian representatives would keep in touch with developments during the United Kingdom’s negotiations with the Six, were amended. For example, that portion of paragraph (4) beginning “While the first stage of the consultations would take place in London …” to the end of paragraph (4) was not approved by Cabinet. The preceding sentence was amended to state “Canadian representatives will have to maintain the closest possible contact with the United Kingdom and other Commonwealth countries in London.”

The objective of these changes is to give effect to Cabinet’s decision that there should be

no suggestion that the United Kingdom would be negotiating in Brussels on our behalf;

no Canadian representatives at Brussels keeping in touch, either directly or “in the corridors.”

Cabinet, however, decided that, if the meeting beginning September 18 in London indicates that the United Kingdom is going ahead with joining the E.E.C. anyway, Canada wants a Commonwealth Prime Ministers’ conference.

The Minister commented that the role of the Canadian representative at the talks in London was one requiring great tact and the ability to avoid even by implication entering into commitments. The selection of an official with the right qualifications was, therefore, a matter of great importance.

ROSS CAMPBELL

518. DEA/12447-40

Memorandum from Special Assistant to Secretary of State for External Affairs to Under-Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], August 30, 1961

The United Kingdom and the Common Market

With reference to Mr. Campbell’s memorandum of August 29 recording Cabinet decisions on this subject, I understand that it is not the present intention of the Cabinet Secretariat to include a reference to a Commonwealth Prime Minister’s Conference in the Cabinet Conclusion which is being prepared on the outcome of the discussion on this Item on August 29.

H.B. R[OBINSON]

519. DEA/12447-40

Under-Secretary of State for External Affairs to Deputy High Commissioner of United Kingdom

CONFIDENTIAL [Ottawa], August 30, 1961

Dear Mr. Fowler,The Canadian Government welcome the United Kingdom Government’s proposal to consult with other Commonwealth Governments in relation to the United Kingdom’s negotiations with the Six. Representatives of the Canadian Government will be available in London for these consultations from approximately September 18, the date suggested by the United Kingdom Government. The United Kingdom Government just before the visit of Mr. Sandys invited the views of the Canadian Government on the economic interests for which some special arrangements were considered essential and on the possible forms that such special arrangements might take. We have given serious consideration to this request. The fact is, however, that the diversity of Canadian interests in the United Kingdom market – more diversified than in the case of any other Commonwealth country – and the differing interests of different regions of Canada, of different industries in Canada and of individual producers within these industries, are such that it would not be practicable to provide general answers to this question. In order that we may know what Canadian interests may be in jeopardy and make suitable preparations for these consultations, it is urgently necessary for us to know what the United Kingdom in its own preparations for negotiations with the Six has in mind in respect of the various sectors of trade.The close and mutually advantageous trade relations between the United Kingdom and Canada over the years have been based upon the maintenance of duty free access to the United Kingdom market for virtually all Canadian products, as well as upon the preferential tariff arrangements made from time to time by each country for the benefit of the other. The United Kingdom in its own interest adopted the policy of free entry and in the context of mutually advantageous Commonwealth trading arrangements saw fit to maintain free entry for most Commonwealth products when its adopted a tariff on foreign products. The United Kingdom Government is well aware of the importance of the United Kingdom market for Canada’s exports. In recent years about one-third of Canada’s exports to the United Kingdom have been in agricultural products, about one-half in basic industrial material and about one-fifth in a variety of semi-processed and manufactured items. It has clearly been in the interest of the United Kingdom to obtain industrial materials and foodstuffs free of duty from Canadian and other Commonwealth sources. Preferential free entry for manufactured products from the manufacturing industries of Canada has never constituted a serious threat to United Kingdom industry but has given the Canadian producers concerned an opportunity to develop by providing them with a wider market than would be available in Canada without at the same time exposing them to the full force of foreign competition. Some 75% of the United Kingdom exports to Canada, which are very largely in the field of manufactured products which compete with Canadian products, enter Canada at preferential rates.In the forthcoming consultations we shall wish to take all these factors into account in the light of the long history of our intimate trading relationship. We shall also have in mind the special contractual arrangements in the Exchange of Notes of October 30, 1947 between our two Governments.

Yours sincerely,N.A. ROBERTSON

520. PCO

Memorandum from Secretary of State for External Affairs, Minister of Finance, and Minister of Trade and Commerce to Cabinet

CABINET DOCUMENT NO. 321-61 [Ottawa], September 5, 1961SECRET

Consultations Re Possible United Kingdom Association with the European Economic Community

In accordance with the Memorandum of August 22 on the above subject which was considered by Cabinet on Tuesday, August 29, the United Kingdom has now been officially advised that “representatives of the Canadian Government will be available in London for consultations from approximately September 18.” It is expected that these initial consultations will last from one to two weeks.It is recommended that the Canadian delegation to these consultations should be led by Mr. James A. Roberts, Deputy Minister of Trade and Commerce, and should include officials from the Department of External Affairs, the Department of Finance and the Department of External Affairs, the Department of Finance and the Department of Trade and Commerce.The delegation should be guided by the position taken by Canadian Ministers at the time of the visit of Mr. Duncan Sandys, the British Secretary of State for Commonwealth Relations to Ottawa July 14 and 15 and by the Memoranda approved by Ministers in preparation for Mr. Sandys’ visit. In particular, the delegation should not go beyond the position taken by Canadian Ministers on this subject on July 14 and 15 and should avoid becoming in any way a party to whatever opening positions are decided upon by the United Kingdom in their negotiations with the Six. Immediately on their return to Ottawa the delegation should submit a report to Cabinet on the results of these consultations.Footnote 39

[H.C. GREEN][D.M. FLEMING][GEORGE HEES]

521. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], September 14, 1961

Present

The Prime Minister (Mr. Diefenbaker) in the Chair,

The Secretary of State for External Affairs (Mr. Green),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of Justice (Mr. Fulton),

The Minister of National Revenue (Mr. Nowlan),

The Minister of National Defence (Mr. Harkness),

The Minister of Citizenship and Immigration (Mrs. Fairclough),

The Minister of Fisheries (Mr. MacLean),

The Postmaster General (Mr. William Hamilton),

The Solicitor General (Mr. Browne),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of Defence Production (Mr. O’Hurley),

The Minister of Public Works (Mr. Walker),

The Associate Minister of National Defence (Mr. Sévigny),

The Minister of Forestry (Mr. Flemming),

The Secretary of State (Mr. Dorion),

The Minister without Portfolio (Mr. Halpenny).

The Secretary to the Cabinet (Mr. Bryce),

The Assistant Secretary to the Cabinet (Dr. Hodgson).. . .

Possible Entry of United Kingdom into European Economic Community

(Previous reference September 6)

Mr. Fulton said it was unrealistic and unwise for the government to continue an attitude of opposition to the United Kingdom joining the European Economic Community when the British government had clearly decided to do so if possible. The government of Canada should accept the situation now and should find positive means of reducing the damage to Canada and of gaining any possible advantages. The public regarded the government’s attitude as negative and defeatist. The proposal of the Leader of the Opposition that a North Atlantic trading area be established was apparently attractive to Canadians. The world was moving toward larger trading groups, and Canada should not oppose this trend.Canadians saw no alternative for the U.K. but to join the E.E.C., and they blamed the government of Canada for constantly bleating instead of living with the times.The government had no reason to be ashamed of its efforts to persuade the U.K. not to endeavour to enter the common market. Now, having failed in those efforts, Canada should make the most of the actual situation.It was therefore unwise policy and unwise politics for the government to continue open and vehement opposition in the way Ministers were doing, to judge from the press reports from Accra.

During the discussion the following points were raised:

Large Canadian corporations were already sending representatives to Europe to try to gain from the U.K.’s probable entry into E.E.C. They were taking the view that the change was inevitable.

The French press was saying that President de Gaulle would not allow any derogations from the Treaty of Rome regarding the Commonwealth. Therefore, it was not certain either that the U.K. would enter the E.E.C. or that Canada could gain the adjustments it wanted.

Some one said that Canada should seriously consider joining the Organization of American States at this time.

Canada should seek to develop markets outside Europe and the United States, particularly for manufactured goods.

Representatives of eight large pulp and paper companies had waited upon the Minister of Forestry to ascertain how they might take advantage of the new situation. They took it for granted that the U.K. would join the European group.

The most likely response of manufacturers would be to open up plants in Europe. The problem of the future of Polymer Corporation Limited was exactly similar, and should be settled quickly.

Canada would be opposing history by trying to block steps which might ultimately lead to a United States of Europe.

The Cabinet agreed that the Prime Minister should be informed that it was the consensus of the Cabinet,

that Canada should now accept as a fait accompli the United Kingdom decision to try to enter the European Economic Community, and should seek the course of action that would gain the best advantage for Canada in the new situation; and,

that the government should accept the position as gracefully as possible despite its previous strong opposition, while being prepared to defend the logic of its efforts to dissuade the United Kingdom from reaching its decision.. . .

The entire second day of the CECC was devoted to discussion of relations between UK and EEC. It was clear from the beginning of the meetings that despite the UK’s known reluctance to discuss this subject in any detail in Accra, all other delegations clearly regarded this item as the most vital and significant on the agenda. Consequently the atmosphere before Wednesday’s sessions was charged with the expectation of a full scale debate – an expectation that was realized to the full. The debate was at a very high level indeed; while all delegations showed commendable restraint their statements were expressed in the frankest and most forthright terms; they revealed accurately and vividly the very serious apprehensions, doubts and continuing uncertainties with which Commonwealth governments view the approaching negotiations between the UK and the Six. It was abundantly clear that in the opinion of almost all Commonwealth governments any agreement between the UK and the Six will have the deepest and most far-reaching implications for the future of the Commonwealth as a whole and for the trade and economic prospects of individual members. There was no repeat no indication at the conclusion of the debate of any change in the UK government’s attitude but the views expressed with such obvious sincerity to this collective Commonwealth gathering may well have some impact on UK ministers.Most delegations, except for the UK, who were naturally a little uneasy, welcomed and responded to the clear lead provided in the statements of the Canadian ministers. The Canadian statements were probably the strongest of the day but the representatives of Ghana, India, Ceylon, Australia, Nigeria and New Zealand left no repeat no doubt about the strong opposition of their governments to UK membership of the EEC. The West Indies delegation, expressing his government’s view “as of now” (i.e. while still a UK dependency) took a different attitude and his statement showed that consideration is being given to the possibility of the West Indies Federation acquiring AOT (i.e. semi-colonial) status under the Treaty of Rome if the UK should join EEC. The Pakistani delegation in a statement which was unlike most of the others seemed to waver between opposition (Pakistan would prefer the UK to stay out of the EEC) and conciliation – conciliation apparently based on the assumption that UK membership of the EEC is inevitable. He said that by and large he thought the strong stand taken by the other Commonwealth governments would not repeat not provide a solution to the UK problem.The Malayan delegation was fully aware of the political and economic implications of closer association between the UK and the Six but he hoped that expansion of the EEC would lead them to adopt a liberal outlook on trade and this he thought would benefit the UK and the Commonwealth as a whole. Cyprus and Sierra Leone, present for the first time at the CECC, associated themselves with the line taken by Canada and other members and expressed their fears about the future of their own economies and trade and for the future of the vital Commonwealth links. The Federation of Rhodesia and Nyasaland did not repeat not speak to this agenda item.

The Chancellor of the Exchequer, Mr. Lloyd, led off the discussion and quoted at length from the statement made by Prime Minister Macmillan to the House of Commons on July 31 stressing that (a) if the negotiations showed that closer UK association with Europe would injure the Commonwealth then the UK would not repeat not feel able to join the Common Market and (b) that no repeat no agreement would be entered into by the UK without House of Commons approval and until after full consultation with other Commonwealth governments. Most of the Chancellor’s presentation was familiar but he said that the importance of the UK’s decision to enter negotiations should not repeat not be exaggerated; the UK’s position vis-à-vis the EEC countries had reached the point where the issue could be brought to a head only by a UK offer to negotiate.The governments of the Six realized that the UK had special problems because of her Commonwealth connection which would require special provisions like those which had been worked out originally for France. The UK government would regard these special provisions as negotiable in principle and the Chancellor pointed to the recent statement by the governments of the Six in which he said they had emphasized their view of the importance of the Commonwealth. Mr. Lloyd hoped that this sentiment would be expressed in practical terms. On the question of Commonwealth consultations he said the UK had not repeat not yet received a reply to its application to negotiate and therefore no repeat no final arrangements could be worked out; in any event it was better to leave details of these arrangements to be discussed at the talks opening September 18 in London and other Commonwealth capitals.Mr. Hees’ statement followed Mr. Lloyd’s in the morning and contrasted sharply with it. It set the stage for the stimulating discussion which followed. He discussed the question under three headings (1) what benefits could the UK expect from a closer association with the Common Market? (2) The importance to Canada of maintaining her present trading arrangements with the UK; and (3) the effect which changes in the present trading arrangements between the UK and her Commonwealth partners would have on the future of the Commonwealth. The full text of Mr. Hees’ statement is being sent by separate telegram.†Mr. Fleming spoke at the afternoon session just before Mr. Lloyd’s summing up. He dealt in broad and forceful terms with the important economic and political aspects of this vital question, and pointed particularly to the severe restrictions on the UK’s freedom of decision and action that would result from their membership of the EEC and to the serious implications these restrictions would have for the future of the Commonwealth. He referred to the inadequacy of bilateral discussions and the need for a plenary meeting of Prime Ministers at which this question would be fully and completely discussed. The UK decision to negotiate was far reaching and it was possible they might find themselves so entangled in the negotiations that they would find it virtually impossible to withdraw. If they did withdraw the UK would suffer another diplomatic defeat and the rift in Europe would be widened.Any agreement between the UK and the Six could not repeat not fail to weaken the Commonwealth – in the long run it might become a Commonwealth in name only. As the underdeveloped members of the Commonwealth had pointed out, UK membership of EEC would have the most serious implications for them. AOT status which had been suggested for some members of the Commonwealth was not repeat not a satisfactory arrangement and would seriously impair the political independence and integrity of the newly independent Commonwealth members.In the Canadian view the UK had, in negotiations regarding European integration, consistently overestimated its own bargaining power (the failure of the 1958 negotiations was an example) and there were very serious doubts that the UK would be able to negotiate adequate safeguards for Commonwealth interests. Adequate safeguards could be obtained only if the present terms of the Rome Treaty were scrapped and there was no repeat no prospect of this. The UK hoped to influence the Six towards more liberal policies but the Canadian government’s view was that they stood a substantially better chance of doing this if they were to remain outside the Six in close association with the Commonwealth. Similarly, it seemed to the Canadian government that the chances of achieving closer political unity in Europe would be better if the UK maintained its present world position. The UK had been a leader in the drive toward freer multilateral trade on a worldwide basis and it was certain that their example would be lost if they were to become associated with one of the regional trading blocs. The GATT and the Commonwealth with its preferential trading system both represented workable alternatives to UK membership of the EEC.The final report of the Montreal Conference contained several very positive statements regarding maintenance of the Commonwealth preferential system and free access for Commonwealth products to the UK market. It now seemed that, a short three years later, all these statements were to be thrown out the window.The UK claimed to be attracted by the prospect of a large market comprising some 170 million people plus the population of the UK. Even if the population of some EFTA countries were added, the total would only be one-quarter that of the CommonwealthFootnote 40 and it could not repeat not be forgotten that the UK sells three times as much of its products to the Commonwealth as to the EEC. It was argued that access to a larger market would mean more efficient production on the part of UK industry and an improvement in the UK’s competitive position in world trade. As the Australian delegation had pointed out, experience with the USA, the largest single market in the world, showed how difficult it was to achieve access into large single markets.The Commonwealth was the only dynamic international institution which carried a message of freedom to the whole world. The newly independent nations had almost without fail freely chosen to become full members of the Commonwealth and the emergent territories showed every indication of continuing this trend. These were illustrations of the kind of organization which was meeting in Accra but the statements that had been made around the table by various countries showed clearly that it was a moot point whether all members would wish to stay in if Commonwealth relationships were to be modified on account of UK membership of the EEC. Mr. Fleming reminded the Council that Commonwealth trading relations are contractual. Commonwealth governments enjoy trade advantages in the UK market which have been bought and paid for by granting similar advantages in their home markets. If the advantages in the UK market were lost, Commonwealth governments would have no repeat no choice but to look elsewhere. This was no repeat no threat of retaliation but a simple statement of fact. It had to be recognized that world trading arrangements were made in the form of agreements to exchange advantages. If one country lost certain advantages, it was inevitable that it should seek to replace them.There was serious concern in many Commonwealth countries including Canada about the UK’s repeated reassurances with respect to trading in agricultural products, particularly in view of what was known about the EEC’s common agricultural policy and the policy of the French government. It had to be recognized that the situation Commonwealth governments now had to face with respect to agriculture represented a complete reversal of the policies agreed at Montreal.Mr. Fleming said there was real substance in the present political and economic relationships between the UK and other Commonwealth countries. It now seemed that this substance was to be exchanged for the illusory benefits of membership of the EEC. There was a great responsibility on the UK in this matter. Delegations in Accra had revealed their deep seated fears, grave forebodings and serious apprehensions but it should be remembered that these feelings were those of the UK’s closest friends.Delegations from the underdeveloped members most of whom preceded Mr. Fleming, spoke in the strongest possible terms against the suggestion that parts of the Commonwealth might assume so-called AOT status. They regarded such a move as a dangerous threat to their political independence and integrity and as a reversion to colonialism. Unless all members of the Commonwealth became associated with the EEC, it would create discrimination between different parts of the Commonwealth, which would in the long run be fatal to the Commonwealth. The Nigerian delegation said that to acquire AOT status would imply second rate membership which could not repeat not be accepted by any Commonwealth country. AOT status he said represented a serious obstacle to African unity, one of Nigeria’s major policy objectives. The present AOTs of the EEC clung jealously to the economic privileges they enjoyed under the Rome Treaty and this damaged Ghana and Nigeria as well as the concept of African unity. If the UK should join the EEC without adequate safeguards for Commonwealth interests, Nigeria would hope that the countries of Africa would form an African Common Market to protect their own interests. The Ceylonese delegation and those of India and Ghana spoke in similar terms, the Indian delegation saying that AOT status “should not repeat not be touched with a barge pole.” He made the further point that acceptance of AOT status by some Commonwealth members but not repeat not others would mean discrimination between Commonwealth members. This would have the most serious reaction in India, with results that could not repeat not be predicted. He said that in considering this aspect of the question, thought should be given to the interests of developing nations outside the Commonwealth – for instance in Latin America. He also made a plea for the removal of quantitative restrictions imposed by industrial countries against the exports of developing nations, a theme which was repeated with force by most other developing members. He and the Ceylonese delegation said they would reject AOT status out of hand if it were offered. Only the West Indies diverged from this general line on the question of AOT status, although Rhodesia was not repeat not heard from.The Australians, and the New Zealanders to only a slightly lesser degree, took a strong stand in opposition. Both expressed the most serious apprehensions for their own economic and trade prospects and for the future of the Commonwealth. New Zealand pointed to the spirit of the Accra discussions as evidence of the vital element in the Commonwealth relationship. They were worried about the possible loss of the UK’s example as a liberal trading nation and hoped that the traditional UK approach on trade matters would not repeat not be submerged in European protectionism. Mr. Holt of Australia made a telling point by referring in some detail to the many assurances given by the UK over the years and to the equally numerous changes in the UK attitude that had occurred despite these assurances. He painted a bright picture of the future prospects for the UK and the Commonwealth over the next ten years if the UK did not repeat not join the EEC, and contrasted this sharply with the prospects for Australia’s trade and industry if the UK should decide to join. He stressed the disastrous effect for individual communities which depended almost entirely on the UK as an export market; there was no guarantee, he said, even if most of Australia’s trade with the UK could be protected, that these communities would not repeat not be obliterated. Looked at in this way, unless all the present Commonwealth trading relationships were retained, the price to be paid for UK membership of the EEC was too high.Mr. Lloyd summed up the discussion but again his statements revealed nothing of the UK position that was not repeat not already known. He defended the UK’s past assurances and changes in attitude on the grounds that these had been forced by changing circumstances in European affairs. On the AOT question he said it never had been the intention of the UK that any Commonwealth country should take second class status. He recommended that judgment be suspended on this whole matter until the EEC’s current review of AOT arrangements was completed. He said that there were a number of sections in the Treaty of Rome on which the UK would press for clarification. One of the most significant of these was the question of the political development of members of the Common Market. He thought it would be possible in the anticipated negotiations to discover very soon whether the kind of arrangement the UK had in mind was possible or not repeat not. The UK was well aware he said of the danger that some vital element might be passed over in the negotiations. He was sure that the UK’s approach was the right one and did not repeat not accept that their negotiating position was weak. What was clear was that their bargaining power would be further reduced as time went by. There were strong forces in the Common Market which desired UK membership and this should not repeat not be forgotten.Mr. Fleming and Mr. Hees suggest that the CECC communiquéFootnote 41 which was in a separate message might well be tabled in the House of Commons at the earliest opportunity.

Yesterday Mr. Fleming accompanied by Rasminsky and Plumptre called on Mr. Ball who was accompanied by Springsteen.

Mr. Fleming opened the discussion with a fairly detailed account of discussion on this subject at the Commonwealth meeting in Accra last week. He emphasized the unanimity of opposition to the UK move and the particular danger that Commonwealth countries in Africa and Asia, particularly India, might feel the Commonwealth ties greatly weakened and indeed might withdraw entirely. Contrary to press reports the position taken by Commonwealth countries in Accra was genuine and not repeat not merely a posture to strengthen their position in connection with the coming negotiations.

Mr. Fleming said that Commonwealth countries had the impression that Washington had given a blessing to UK membership in the Six. He referred to the recent statement of Secretary Freeman that Commonwealth preferences could not repeat not be perpetuated as a result of UK-EEC arrangements.Footnote 42

Mr. Ball said that the USA position had been somewhat misunderstood. The USA had never taken any initiative in the matter; it was the UK that had sought a USA opinion. The farthest the USA had gone in reply was to indicate that UK membership in the EEC would further European integration political and economic. However they had scrupulously refrained from pressing the UK because of her world-wide interests including the Commonwealth. The USA was willing to accept increased trade discrimination against it if but only if the objective of European integration was clearly furthered.

In connection with the coming negotiations the USA identified four areas of interest:

As regards temperate agriculture (e.g. wheat and coarse grains) they envisaged discussions commodity by commodity on a global basis with all main suppliers included.

In regard to manufactured goods (where the Commonwealth country most affected would be Canada) the USA, faced by new and important discrimination against themselves in both UK and EEC, could not repeat not tolerate continuation of preferences granted to countries outside the area of European integration.

As regards tropical products the USA had some interest on their own behalf and also an interest on behalf of “their clients” (Latin America). The right solution in this field lay in complete elimination of preferential areas and in elimination of tariffs by all industrial countries. The readjustments involved would take a long time and USA was willing to contribute funds to alleviate damage where it occurred and also to consider “income stabilization arrangements” without which the benefits of external aid might be wiped out as a result of falling prices. He referred to current discussions directed towards world free trade in coffee, cocoa, bananas, tropical oil seeds and tropical woods.

In connection with the general Commonwealth system of reciprocal preferences Mr. Ball said they had not repeat not really done very much thinking.

While there was not repeat not much time for discussion we were able to make a number of comments including the following:

Mr. Ball had, under item (d) above, indicated that he anticipated progressive narrowing in Commonwealth preferences. We pointed out that while this might merely mean increases of BP rates to MFN rates (which would presumably improve the USA competitive position in Commonwealth markets) it could also, through the unravelling of a network of trade agreements, precipitate a wide-spread increase of protectionism.

The UK economic system, based on free entry of foodstuffs and raw materials, subsidized agriculture and world-wide markets, differed fundamentally from the continental system based on protected domestic markets and protected high cost agriculture. The former was much more closely in line with USA policy objectives in the commercial field. Yet the USA was in fact taking a position in regard to the coming negotiations which forced UK into the continental system rather than vice versa. In so doing USA was in effect favouring a pattern of negotiations in which, in the interests of European integration, widespread damage would be done to Commonwealth countries all over the world.

The political implications of this, particularly in Asia and Africa, seemed to be ignored. Mr. Fleming particularly urged Mr. Ball to listen carefully to Mr. Desai who will be calling on him in Washington en route to Delhi.

In conclusion Mr. Ball suggested that Canadian officials should move to Washington soon to explore this subject “in greater depth.” Mr. Fleming thanked him for the invitation but did not repeat not specifically accept. This leaves the ball in our court.

(At another stage in the conversation Mr. Ball suggested that the same group of officials might discuss the question of OECD assessments.)

24. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], September 26, 1961

Present

The Prime Minister (Mr. Diefenbaker) in the Chair,

The Secretary of State for External Affairs (Mr. Green),

The Minister of Finance (Mr. Fleming),

The Minister of Trade and Commerce (Mr. Hees),

The Minister of Transport (Mr. Balcer),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of Justice (Mr. Fulton),

The Minister of National Revenue (Mr. Nowlan),

The Minister of National Defence (Mr. Harkness),

The Minister of Citizenship and Immigration (Mrs. Fairclough),

The Minister of Fisheries (Mr. MacLean),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of National Health and Welfare (Mr. Monteith),

The Minister of Agriculture (Mr. Alvin Hamilton),

The Minister of Defence Production (Mr. O’Hurley),

The Minister of Public Works (Mr. Walker),

The Associate Minister of National Defence (Mr. Sévigny),

The Minister of Forestry (Mr. Flemming),

The Secretary of State (Mr. Dorion),

The Minister of Northern Affairs and National Resources (Mr. Dinsdale),

The Minister without Portfolio (Mr. Halpenny).

The Secretary to the Cabinet (Mr. Bryce),

The Assistant Secretary to the Cabinet (Mr. Labarge).. . .

COMMONWEALTH ECONOMIC CONFERENCE, ACCRA

(Previous reference September 19)

The Prime Minister observed that the Minister of Trade and Commerce and the Minister of Finance had returned from the meetings of the Commonwealth Economic Conference in Accra. Mr. Hees had arrived in time to make a brief statement to the House of Commons yesterday and would address the House to-day, to report further on the substance of the meetings and the position he had taken. Mr. Fleming would also make a similar report. There had been a strong critical reaction to the press reports from Accra. Individuals, associations and the press, both Canadian and British, had been very outspoken. Mr. R. Fowler of the Canadian Pulp and Paper Association and Mr. E. Kierans of the Montreal and Canadian Stock Exchange were among those who had voiced such criticism. There was reason to be concerned as to what the position of the Canadian government would be should the present government in the U.K. be defeated in the next election. It would not do for Canada to be held responsible for a socialist government coming to power in Britain.

During the discussion the following points were raised,

It was said that public reaction indicated that little or no attention had been paid to the political importance of the U.K. move to join the E.E.C. All that Canadians had done was to think in terms of trade. The E.E.C. was in fact a big political European bloc. The British thought that once they were in it they would be able to influence its direction. There was little chance of that. Furthermore, once they became a part of it they would be unable to continue as head of the Commonwealth. The British move was a political one, and much more fundamental than trade. The reaction of the Commonwealth ministers at the Conference might possibly stop the U.K. from joining the E.E.C.

It was felt Canada could not overlook the disastrous effect on Canadian trade that would follow the U.K.’s joining the Common Market. There was no alternative to the Commonwealth preference system that would not destroy a large segment of Canadian industry and create widespread unemployment particularly in the manufacturing industries.

Some said the Canadian representatives at the Commonwealth Economic Conference had gone beyond their terms of reference. On the other hand, it was argued that they had introduced nothing new. The line taken was that approved by Cabinet and the points made were the same as had been expressed at the earlier meeting with the Honourable Duncan Sandys on his visit to Ottawa. Britain came out of the Commonwealth Conference with flying colours. It had been a blunder, however, to have sent individual Ministers on separate missions to the Commonwealth countries. Mr. Selwyn Lloyd had admitted this in confidence. Only when the Commonwealth countries got together were they able to compare notes. All spoke out strongly, especially India which claimed that the only tangible Commonwealth bonds were trade and tariffs. Canada’s statements had been no stronger than those of other countries.

Although it had been reported that the Indian delegate had been the only reasonable spokesman, this view was completely false. He had sent a note congratulating the Canadian Minister of Finance after his speech for his excellent presentation “in defence of the Commonwealth which is in danger of disappearing.”

It must be realized that the background of a number of the Commonwealth countries was not like Canada’s. Their link with Britain had little of the racial and sentimental attachments. Only the Commonwealth kept them united.

Some felt that the press reports had been false, inaccurate half-truths, full of misunderstanding and misrepresentation. Nevertheless, the impression was abroad that Canada had given Britain but two alternatives – in or out – and had been anti-British.

On the other hand, Mr. Selwyn Lloyd himself had said that the views expressed would help Britain in her negotiations with the Six. Mr. Martinelli of Italy had expressed the view subsequently that, if the Six really wanted Britain in, they would now know that greater concessions would be required than had been granted other members.

The Prime Minister said he would be speaking in British Columbia this week and wished to be in possession of all the facts and arguments of Canada’s case.

The Cabinet,

noted that the Minister of Finance and the Minister of Trade and Commerce intended reporting to the House of Commons on the Commonwealth Economic Ministers’ Conference in Accra, and agreed that the reports should be factual and handled with discretion, as should any statement on the subject made outside; and,

also noted that the Prime Minister would be speaking on the subject in British Columbia this week.. . .

525. D.M.F./Vol. 135

Memorandum from Department of Finance to Minister of Finance

SECRET [Ottawa], September 26, 1961

During the last ten days I have not had time to put down some thoughts that have been very much to the forefront in my own consideration of the results of the CECC meetings in Accra. I believe that a number of developments may be anticipated in the wake of our deliberations at Accra, all of which are urgent and all of which I believe we should prepare positions on.If our position at Accra was correct in its analysis of the situation, it would seem that we could expect serious political repercussions within the United Kingdom. Moreover, we can fully anticipate that the developments in regard to European trading arrangements will come to the forefront politically at home. The Leader of the Opposition has made no secret of the fact that he intends to challenge the Government’s position in regard to the United Kingdom decision to seek membership in the EEC, and in a way designed to make it a major political issue.We can, I think, anticipate three possible results from the Brussels negotiations which open very shortly. The first is that the United Kingdom, partly as a result of Accra, and partly as a result of the position which is being taken by the United States in regard to any arrangements that might be made by the United Kingdom to safeguard Commonwealth interests, might find it expedient to seek a way out of the negotiations immediately. The second is that the United Kingdom will swiftly find it has reached an impasse in the negotiations in terms of its commitment to protect Commonwealth interests. The third is that the United Kingdom will reach a basic position in the negotiations satisfactory to itself and which it believes will enable it to occupy a tenable position in regard to its commitment to protect Commonwealth interests but which we will find (and probably most other Commonwealth countries) unacceptable.In the event of either of the first two developments occurring, it will mean a complete failure of the United Kingdom initiative. I believe we have to recognize the possible damage which may occur to political relationships within the Commonwealth, to international relations generally, and to the domestic political position of the Government. I think one may anticipate with certainty that in the event of either of the first two possibilities materializing there will be very strong pressures upon Canada by the United Kingdom to provide assistance in finding alternative solutions to her economic and political problems. I think your interview with the group of senior United Kingdom correspondents in Vienna is ample evidence of this.Footnote 43In stressing the dangers which may lie ahead in the event of a collapse of the negotiations, either by the free-will choice of the United Kingdom or by arrival at an impasse, we must also consider the consequences for the political cohesion of the free world.Of particular concern is the position taken by the United States that under no circumstances may the Commonwealth preferential system be carried over into an enlarged European grouping. When one sets this position side by side with Mr. Macmillan’s commitments, it becomes difficult in the extreme to believe that any negotiation could arrive at a realistic solution which would embrace Commonwealth interests. At the same time, I would suggest, the United States’ position enlarges the dangers of the realization of the third possibility outlined above, that is, a rapprochement between the United Kingdom and the Continent in which, in fact, Commonwealth interests were not protected or at least not sufficiently protected to enable their domestic political rationalization in each of the Commonwealth countries concerned.It is quite apparent that the United Kingdom Government has staked its political future on this initiative. There seems to be general agreement that failure would be interpreted as a political defeat in the United Kingdom and would give offence to the Six, perhaps irreparable offence.It is entirely possible that within the month we will see a situation materialize very akin to that obtaining following the breakdown in December 1958 of the free trade area negotiations. This seems the more likely, as the one really strong hope of exercising leverage on the Six to accept an adequate measure of protection for Commonwealth interests, particularly on Paris, was the United States.If there is to be no resolution of the division in Europe along the lines contemplated in the United Kingdom initiative, and I take it that there cannot be any such resolution which would be satisfactory to us, and if one can foresee a hiatus such as developed in December 1958, then I think we should consider now what the possibilities are for a major new Canadian initiative designed as an assault upon the EEC barriers on a multilateral basis which would be of benefit to ourselves, to the UK, to the US, and to the primary producers of the Commonwealth and elsewhere. Such an initiative could not, of course, be contemplated without its major burden being borne by the United States. Yet if the United States could be made to realize the broad international dangers which lie in the present course, particularly in Asia and Africa, can we discard in advance the possibility that the United States might be prepared to undertake such a drive on Common Market barriers? This leads me quite naturally to raise the question as to whether such an initiative should not be considered in advance of the further conversations on the United Kingdom-EEC which are contemplated with Mr. Dillon and Mr. Ball in Washington. Certainly it would seem that it is unlikely that such further conversations will yield much change in the position of the United States in regard to the preferential system unless Washington can be made to see a larger reason for taking a broader view of European trading arrangements.It would seem to me to be possible that a situation will develop very shortly in which a new initiative such as I have outlined might be both possible and desirable. In addition to the reasons I have given above, I would cite the fact that the United States is coming up in the new year to the whole problem of revamping its tariff and the difficulty of a multilateral reduction in import duties and other barriers to trade, such as would be involved in a new initiative, will undoubtedly increase in this atmosphere.What I have in mind for a new initiative resembles somewhat the North Atlantic free trade area but would seek to avoid any abrupt adjustment over the whole range of the tariff and would further seek to bring an accommodation in Europe and between Europe and North America on a multilateral basis, embracing not only a general agreement on tropical products and some industrial materials but also a freeing of trade in manufactured goods. The price to be contributed by the Common Market would be an accelerated multilateral reduction in its external tariff and a more liberal approach to agricultural trade. The price the United States would have to pay would be a somewhat equivalent reduction in its general barriers to both primary and processed goods and the price which we, and others in the Commonwealth would have to pay, would be some reduction in the margin of preference by cuts in the MFN rate.While this possibility has serious political and economic implications in Canada, against it we must stack the equally difficult problems which could arise in Europe if the United Kingdom decision to join the Common Market matures – disadvantages not only in terms of loss of markets but in terms of reverse preferences.For such a new initiative we can mark advantages both political and economic. There can be no doubt after Accra that such an initiative, were it to lead to multilateral reduction in trade barriers, would find wide acceptance in the under-developed countries of the Commonwealth and, we may suppose, among under-developed countries generally. Moreover, the tone of discussion at Accra leads one to believe that such an initiative on the part of Canada would strengthen the quality of our leadership in the Commonwealth. I need hardly add that an initiative directed to the release of new energies in Europe and North America designed to move the world economy further on the road to a freer system of trade and payments, would obviate many of the political vicissitudes which can be foreseen at home in Canada.I put these thoughts before you because I feel very strongly that in the light of the United States’ position the situation in Europe can deteriorate very rapidly with adverse consequence to us all. If we are to be realistic, I think, we must face the fact that if the United Kingdom initiative fails, some new alternative solution will have to be found if Commonwealth cohesion is to be preserved and if our own commercial self-interest is to be protected.

The fifty secondth session of EEC Council of Ministers ended this afternoon and the Press Communiqué has just been made available. We shall report in detail by telegram tomorrow. Following is substance of decisions in regard to UK application for membership in the community.

The Council approved the text of the Community’s reply to Britain’s request for membership. The President of the Council, Professor Erhardt, submitted the Community’s reply to Ambassador Tandy, Head of UK Mission to European Communities. The text will be published simultaneously in London and Brussels presumably later this week.Footnote 44

The Council proposed that a meeting be held in Paris on the tenth and perhaps the eleventh of October in the course of which Britain will outline in greater detail than heretofore what she meant by “safeguarding the interests of Commonwealth, EFTA and UK agriculture.” Negotiations would begin some time in the first half of November and would take place in Brussels.

527. DEA/12447-40

Ambassador in United States to Secretary of State for External Affairs

We had a long talk with Schaetzel, Special Assistant to Under Secretary Ball (State Department). He told us that he had been briefed fully on Ball’s talk with Mr. Fleming in Vienna and referred to USA invitation to Canadian ministers or officials for a meeting in Washington in the near future. Schaetzel, who is now working almost full time on UK-EEC matters (and who had just returned from talks in London and Brussels) said that Ball was concerned about the developing split between Canadian and USA views and felt that an early high level meeting was desirable.Footnote 45 He went on to review USA position in some detail and to suggest lines of approach which he thought would be most fruitful for such a meeting. You will appreciate that his comments were made on a purely personal and informal basis.

Schaetzel said that Ball wished to dispel any impression that may have been gained that USA had encouraged UK to make this move. From the beginning USA fully realized this was a matter of “fundamental national importance” for UK and had stressed that the decision was for UK alone to make. In any event, the decision had now been made by UK and there was little point in going over old ground.

Ball had been particularly surprised by the emphasis placed by Mr. Fleming on the political implications of UK move for Commonwealth as a whole. USA had never underestimated the magnitude of the trade and economic difficulties which UK move into Europe would raise for other countries and particularly for Canada. However, they had not repeat not considered that it would raise any major political problems for Commonwealth. USA understood that it had been the generally accepted view among Commonwealth countries in recent years that tariff preferences were gradually losing their significance and that the strength of Commonwealth relations lay increasingly in other than commercial bonds (e.g. historical, sentimental, educational, etc.). They also understood that UK ministers and officials had carefully and responsibly weighed the implications of UK decision and they did not repeat not seem to have the kind of concerns about the weakening of the Commonwealth that Canadian representatives had expressed. If there were any danger of UK move weakening Commonwealth it was surely more because of the political and supranational aspects of the Rome Treaty than because of the Common Tariff. However, if it were the case that British adherence would have this effect then the only way of preserving Commonwealth would be to prevent UK from joining EEC. But events had moved too far for this to be more than an academic question.

Schaetzel developed at some length the rationale of USA attitude. USA saw EEC as a dynamic going concern of great political and economic significance. The entry of UK would make a major contribution to strengthening EEC, Europe and the free world. USA viewed this development as a first step towards something much wider but as yet undefined which would develop gradually over the years and would result in increasingly closer bonds among the Western countries and, indeed, among the countries of the free world.

USA questioned the importance of the economic underpinning as essential to Commonwealth. They would be interested in having a fuller exposition of Canadian assessment, and of the political and economic factors involved in Commonwealth relationship to which we attached importance. Schaetzel recognized, however, that the issues at stake involved political judgments in the final analysis.

UK move into EEC, Schaetzel continued, would involve UK acceptance of a common tariff and a common agricultural policy. This would require sacrifices by all concerned and he readily agreed that the cost to Canada might be greater than the cost to USA. However, to attempt to “blur” this association by making special exceptions and retaining preferences on a permanent basis would alter the nature of the British move and turn it into a mere economic arrangement in which USA interests would be doubly affected without compensating political benefits. USA could not repeat not be expected to accept such a development and would be under pressure to react strongly. Schaetzel characterized attempts to preserve preferential access as a permanent feature of the new arrangements as “backward looking” and not repeat not in tune with the times.

USA recognized that lengthy transitional arrangements would need to be worked out to cushion the impact of UK-EEC merger and Schaetzel felt this was an area in which USA authorities would wish to have full and detailed consultations with Canada to ensure that Canadian and USA interests were safeguarded. Looking beyond the transitional period there was the basic question of the shape which UK-EEC merger should take and in addition what should be the broad long term strategy for the major Western countries. Canada and USA had strong common interests in lowering the common tariff, liberalizing the common agricultural policy and seeking to turn the new European grouping into a major force for freer world trade. OECD could play an important role in this regard. He felt this could be the most fruitful avenue of approach for Canadian-USA discussions.

Schaetzel doubted that USA could be induced to change its basic attitude. He knew that Ball had been criticized as being unduly pro-Six because of his past associations. However Schaetzel sought to assure us that USA position on UK-EEC had received the most extensive consideration and the personal attention of the Secretary of State and the President.Footnote 46

[A.D.P.] HEENEY

528. PCO

Memorandum to Cabinet

CABINET DOCUMENT NO. 365-61 [London], September 29, 1961

SECRET

Report on Consultations with the United Kingdom Concerning the Proposed Negotiations for U.K. Membership in the European Economic Community

IntroductionOn September 6th authority was given for a delegation of officials, led by Mr. J.A. Roberts, Deputy Minister of Trade and Commerce, to proceed to London for consultations concerning the possible association of Great Britain with the European Economic Community. The delegation was to be guided by the position taken by Canadian Ministers during the July talks with Mr. Duncan Sandys and was to avoid involvement which might in any way prove prejudicial to Canadian interests.Despite considerable pressure from the United Kingdom side to adopt a more “forthcoming” and “constructive” attitude, the delegation maintained that their mandate did not go beyond ascertaining, in the light of the assurances which had been given by British Ministers, what measures the United Kingdom proposed to ensure that damage to essential Canadian interests would be avoided in the event of U.K. membership in the E.E.C. The delegation set forth the Canadian interest in all items marketed, or which might be marketed, in the United Kingdom and refused to accept the suggestion that priorities should be established. The delegation indicated the ways in which the various suggestions advanced by United Kingdom officials would fall short of maintaining the present and prospective Canadian place in the U.K. market, but otherwise refrained from commenting on them.In summary, the conclusion of the delegation is that even if the different U.K. proposals for safeguarding Canadian interest were negotiable in their entirety (which seems highly unlikely), the resultant situation would leave Canada considerably worse off in the U.K. market, and that any offsetting advantages in the enlarged market as a whole would, except in the field of raw materials, do little to close the gap. The delegation wishes to suggest that, in the light of this conclusion, authority be given for a thorough review of all factors relevant to the development of Canadian commercial policy in the current situation of prospective change in trade relationships. It is suggested that such a review would be timely and should cover steps which might be taken to advance the Canadian position in the months immediately ahead as well as possible longer term adjustments of, or alternatives to, the present pattern of Canadian trade relations.General United Kingdom AttitudeThe following main points emerged from the consultations:

The United Kingdom is determined to embark on negotiations with the E.E.C. and if at all possible to bring them to a successful conclusion.

The United Kingdom concept of safeguarding Canadian interests is in part conditioned by what it considers to be acceptable to the Community and fails to take full account of the breadth and depth of Canada’s present and prospective stake in the U.K. market.

There is no question of the exclusion of agriculture from the negotiations or of the maintenance of Commonwealth preference and free entry across the board. The United Kingdom accepts the implications of applying the type of common agricultural policy evolving under the Treaty of Rome, including the substitution of a variable levy (which would equalize imported and domestic prices) for the present free entry of a number of important Commonwealth agricultural products, including wheat and barley. The United Kingdom also accepts that the non-preferential common tariff of the E.E.C. will apply to imports into the U.K. from Commonwealth countries, subject only to limited and for the most part temporary exceptions for a select group of products where tariff free or preferential quotas might be negotiated for the transitional period, (the years provided for in the Rome Treaty during which the national units adjust their systems and practices to conform to the full obligations of the Treaty applicable in the definitive period).

In the U.K. view Canada should not measure its prospective position in relation to a common market which would include the U.K. with its present largely free and unrestricted access to the British market. The U.K. argues that, in the face of mounting Exchequer costs and disruptive market conditions (butter and barley) the present U.K. system of agricultural price support and trade would in any event have to change in the direction of limiting duty free imports from the Commonwealth. Moreover, they hold that because of growing pressure on the U.K. market of certain Commonwealth manufactured goods, the present degree of free entry in this sector could also be expected to narrow in any event in future years.

The United Kingdom does not appear to be entering the negotiations with any established minimum position as regards Commonwealth interests, but intends, rather, to explore what may prove possible to negotiate. Its very general objective is to secure arrangements which, although involving changes in access to the U.K. market, would, for some selected products of particular concern to the Commonwealth producers, give opportunity for “comparable outlets” either in the U.K. or in the enlarged Community. Such arrangements would vary from commodity depending on the problems involved.

Barring the necessary procedural and constitutional amendments occasioned by its membership the U.K. intends to accept the chief provisions of the Rome Treaty almost as they stand. It is considered, however, that the Treaty is sufficiently flexible to permit necessary special arrangements and derogations being handled through Protocols. In its opening position the U.K. is anxious not to appear to be upsetting the balance established through the existing Treaty provisions.

The United Kingdom believes that its objectives in the negotiations can be secured if there is a genuine desire for British membership in the Community and the necessary political will is present. The Canadian delegation considers that the U.K. may have again overestimated both its bargaining power and the willingness of the Six to agree to substantial derogations from the content of the Treaty of Rome, however such derogations may be disguised.

It has been agreed with the E.E.C. that the negotiations will be opened in the first half of October. The United Kingdom envisages a first phase in which the objective would be to sweeten the atmosphere and to ascertain in general terms whether there would be a willingness to cooperate in finding solutions to Commonwealth difficulties and the other principal U.K. pre-occupations. The more detailed phase would follow and might last through 1962. This approach may not prove acceptable to the French who may wish to probe the United Kingdom position deeply from the outset.

The U.K. thinks that the Commonwealth problems may be the most difficult in the negotiations. They propose to put them into the ring early on in general terms. Thus Commonwealth difficulties could become the touchstone of success or failure. This has many implications for the Canadian position, including what might be asked of Canada in the event of breakdown.U.K. Suggestions for the “Safeguarding” of Canadian Interests

In general, the U.K. seems to be thinking of possible special measures only to deal with items of large statistical importance in Canada’s trade. It appears to have ignored, or not to have thought of, the problems occasioned by loss of free entry or preference for the many smaller items which together are of significance to Canada in terms of the totals involved, or singly are of critical importance to particular industries or localities. There was a tendency on the U.K. side to discount Canadian interest in many miscellaneous export items on grounds that the amounts were insignificant or that factors other than the preference determined import sources. For some items, such as coarse grains, an attempt was made to argue that normal growth of demand in the E.E.C. market should be accepted as an offset to any decline in Canadian sales resulting from the loss of preference and free entry in the U.K. Thus, in the concept of “comparable outlets,” the U.K. side tends to take credit for any favourable developments which could be expected, whether or not Britain joined. The U.K. has apparently given little attention to the problem of loss of preference against outside suppliers such as the U.S. and the Argentine. In the case of a number of manufactures and a few agricultural products, including soya beans and soya bean products, failure to maintain the preference could mean complete loss of the market. Moreover the U.K. has not suggested ways to compensate for loss of preference vis-à-vis outside suppliers when the common tariff is to be at zero. This situation arises notably for synthetic rubber, hardwood, steel ingots, oil seeds and oil seed products.The following are the types of measures suggested by the U.K. for the protection of essential Canadian interests:

“Assured right of entry for traditional quantities” – offered for wheat and barley, apples and cheese.This is not an assurance of continued sales, but an exception to the expected common policy rules, whereby sales of our wheat and barley would not be restricted up to traditional quantities (sales in a base period) should the Community decide that import licensing should be suspended. This is suggested by the U.K. as a transitional arrangement; other forms of assurance of access suitable for the definitive period would be worked out later; the principle might, however, be settled in the current negotiations.

“Transitional tariff or levy free quotas for the U.K. market” – e.g. canned salmon, and possibly tobacco, some canned fruits and a few manufactures, where a case of special interest could be made out.These quotas would be exceptional and probably would expire at the end of the transitional period. They would be based on previous sales and would, therefore, not take account of growth potential. Moreover, because of the impact of quantitative restrictions in recent years quotas based on import performance would understate Canada’s true export position in the United Kingdom market. A quota solution would, of course, make no provision for new Canadian products which would have been marketable in the U.K. had free, preferential entry been maintained.

“Reduction of the Common tariff to zero or a very low rate on some raw materials” – e.g. aluminium, pulp, newsprint, lead and zinc. If this were not successful, the U.K. suggested as an alternative the establishment of duty-free quotas which might be carried into the “definitive” Treaty period.

“Some reduction of high common tariff rates” – e.g. a variety of items in the field of manufactures and food products.

“The U.K.’s liberal influence in the determination of common agricultural policies” – e.g. the U.K. would work for lower rather than higher price support levels in the Community and would seek to avoid the adoption of measures other than the variable levy which would give additional preference to internal producers.

Possible evolution of new or revised international arrangements for particular commodities – e.g. apples, butter, etc.

A longer transitional period for particularly difficult items to the extent negotiable with the Six.Appraisal

In Annex II to this report† will be found a detailed preliminary analysis of Canadian exports to the U.K. by sectors and an appraisal of the ideas suggested by the U.K. for the protection of certain of our export interests. In general it can be said that “guaranteed right of access” would be of limited value provided our competitive position was unchanged vis-à-vis other suppliers both inside and outside the enlarged Common Market. As indicated in the cereals section of Annex II (to which special attention is directed), this is unlikely to be the case. The fact that even this limited assurance would be subject to re-negotiation at the end of the transitional period is an indication of how low the U.K. has set its Commonwealth sights in the cereals field.Transitional tariff free quotas would ease the adjustment or prolong the agony, depending on one’s point of view. The fact that this preferred access would in all probability not extend beyond the transitional period makes it self-evident that Canadian long term interests would not be safeguarded.Elimination of the common tariff on pulp and newsprint, aluminium, aluminium alloys and lead and zinc would be most welcome. But this objective may prove unobtainable, at least as regards aluminium and lead and zinc because of continental protective pressures.The U.K.’s hope of securing reductions in many high common tariff rates will depend in the first instance on the system to be worked out for the establishment of the Common tariff around the enlarged E.E.C. area. (The U.K. has not revealed its detailed thinking on this issue beyond indicating a hope that, on the whole, the tariff could be reduced, expressing the view that mathematical averaging would not be followed, saying that some account would have to be taken of the amount of trade which comes in free from the Commonwealth and indicating that the U.K. would not be trying to carry into the common tariff the peaks of its m.f.n. tariffs for manufactures.) In connection with U.K. hopes to secure a generally lower common tariff it is relevant that the U.K. m.f.n. tariff is higher for many products than the presently proposed E.E.C. tariff and that there may be a genuine reluctance on the part of E.E.C. to accept further downward adjustments in the common tariff until fuller reciprocity can be obtained from the U.S.A.U.K. ideas about new or revised commodity arrangements are too nebulous to evaluate in their present form.Finally it should be recalled that the various proposals of the U.K. cover only a few products, are limited in time and, in any event, uncertain of acceptance in the negotiations. The conclusion is inevitable that what the U.K. has in mind, even if wholly accepted by the Six, would fail well short of meeting even minimum Canadian essential interests, much less of protection the total of our present position in the United Kingdom market.As an aid to understanding the nature of the Canadian stake in the U.K. market reference might be made to Annex I of this report† which indicates the extent of our free entry, the amount of trade moving with and without preference, the amount of trade which would be unaffected as a result of U.K. adherence to the E.E.C. and the amount of trade which in greater or lesser degree would be adversely affected.Of our total exports to the U.K. in 1960, about 28.5 per cent would not be harmed by U.K. adherence, and approximately 71.5 per cent would suffer some adverse change in terms of access. If the U.K. were able to secure free entry for aluminium, pulp, newsprint, and lead and zinc these percentages would become approximately 50 per cent and 50 per cent. If, through the G.A.T.T. negotiations, the International Wheat Agreement or the U.K. negotiations with the Six, the position of our wheat and flour in the U.K. market could also be assured, the percentages would become 67 per cent in the “no problem” category and 33 per cent in the other.A qualitative as well as quantitative examination of the products for which Canadian terms of access would be adversely affected is required before a proper evaluation can be made of the trade impact of loss of preference in the U.K. market. Moreover, in attempting to judge the possible effect on the Canadian economy as a whole, it would be necessary to examine the extent to which the U.K. market was itself of critical or non-critical importance to the companies concerned. From the trade point of view, allowance would also have to be made for off-setting export gains in the E.E.C. should success attend efforts of the U.K. to secure the elimination of tariffs on aluminium, pulp, newsprint and lead and zinc and other significant reductions in the common tariff. In addition there are all the other factors which must be taken into account in assessing Canada’s future trade prospects, including trade relationships with the United States and other important markets for Canadian exports.Summary and Recommendation

The delegation is of the view that the measures proposed by the United Kingdom to safeguard essential Commonwealth interests, even if fully acceptable to the E.E.C., would fail to protect, or to provide acceptable alternatives to, Canada’s present position in the United Kingdom market. In the light of this conclusion the delegation suggests that departments concerned be instructed to co-operate in the examination of the situation revealed in this report and to consider possible courses of action which might be recommended as appropriate to the changing situation for Canadian trade both in the months ahead and in the longer term.

The Minister of Trade and Commerce said that the Canadian delegation had made its report on consultations in London on the possible association of the United Kingdom with the European Economic Community. This report, which should retain its classification as “Secret,” confirmed clearly that the U.K. had definitely decided to try to join the Common Market.An explanatory memorandum had been circulated, (Report, Chairman, Canadian delegation with the United Kingdom on the European Economic Community, Sept. 29 – Cab. Doc. 365-61).

Mr. Hees proposed that an interdepartmental committee be established to examine the implications of the various possible alternative future patterns of international trade in which Canada might participate. These alternatives might include the possibility that Canada might join the Common Market, the Organization of American States or an Atlantic Community.

The Prime Minister said that, on this day, he had met with Lord Amory who had stated that there was no foundation for the criticism that had been levelled against the Canadian Ministers for their alleged statements at the Accra conference. His first impression of Lord Amory had been very favourable.

The Cabinet agreed with the recommendation of the Minister of Trade and Commerce that an Interdepartmental Committee comprising senior representatives of the Departments of Trade and Commerce, External Affairs, Finance and Agriculture be established,

to examine the situation revealed in the report of the Canadian officials who had consulted with U.K. representatives on the terms of possible U.K. entry into the Common Market; and,

to consider and report upon the implications, for all sectors of the Canadian economy, of the prospective changes in trade relations and various possible courses of action for Canada in trade policy over the long term, including among others the implications for Canada of joining the Common Market, the Organization of American States or an Atlantic Community.. . .

I explained to Mr. Fleming that the High Commissioners have been invited to attend a meeting at the Commonwealth Relations Office at 12 noon today, October 13th. I mentioned to him that on the basis of previous meetings it seemed certain that we would get no information in addition to what we already have from the summary of Heath’s speech in Paris, the press reports and other sources of information. I told him that the reason I was calling was that I would like to know if, unknown to me, any further details had been transmitted to the Canadian Government which would explain what the British Government really means by “protecting the interests of the Commonwealth.”

Mr. Fleming said that nothing further had been received and that there was still no clear understanding of their intention. He said that when Sandys was in Ottawa he did run down a list of the things that we are selling to Britain. He expressed the idea that these sales in most cases would not be too seriously affected. He mentioned that the British housewife had been accustomed to the type of bread made by Canadian hard wheat and that with many other things of that kind it would seem that the market would continue on the basis of traditional trade channels. He did not make any assessment of what trade would be preserved, nor was he specific at any point.

Mr. Fleming said that at Accra what had led to the expression of anger by Selwyn Lloyd was the discussion as to what had been said at Ottawa. When Lloyd made the statement that the trade of the Commonwealth would not be adversely affected, Hees interjected that when their officials had examined the list of those things which Sandys had mentioned, it was apparent that 60% of our export products to Britain would be detrimentally affected. This did not mean a 60% loss, but that in a value of 60% of our present trade there would be a positive detrimental effect.

Lloyd became very angry and said that Hees had no right to mention this because Sandys’ statement had been made in confidence at a closed meeting in Ottawa. It was immediately pointed out to him that they were speaking in a closed meeting at Accra, and what did emerge was that the representatives of the British Government who had gone to different countries had not told the same story. As the representatives of the different countries exchanged their views, this became increasingly apparent and was the background of the very strong statement which was prepared.

Mr. Fleming said our position is clear; “we want all our rights reserved. We look to them to make good their assurance.”

Then, referring to the suggestion that Canadians should send two observers to Brussels to join the British negotiating team, he said that we have no intention of doing this because that would then by inference be accepting this method and it could be said that we had been there and had not objected to what was being done. His words were: “We intend to pass the ball back to them.”

He then said the Australians seemed disposed at first to send observers, but that he is not sure yet what they are going to do.

Referring to a clipping from the Sunday Telegraph of last Sunday (October 8th) which I had sent to him that day, Mr. Fleming expressed considerable annoyance at the attitude being displayed by the British newspapers and British officials to the effect that Canada is acting in a manner which indicates a lack of support for the British position. He said: “I wonder if they forgot that we put up 75 million pounds two months ago to support the British pound.” He referred to the payment by Canada to the I.M.F. in regard to which there was no obligation and Canada itself voluntarily fixed that substantial figure as their contribution to the support of the British economy.

As I informed you last night, I went to CRO at noon today with other High Commissioners, at invitation of Sandys. Purpose of meeting was for Heath to explain position taken by Britain in the Paris talks.

Prior to meeting I had discussion with Sir Eric Harrison, Australian High Commissioner, as result of which he made request at opening of meeting that we be given full text of Heath’s speech in Paris.Footnote 47 I was wrong when I told you last night we had full text of Heath’s Paris speech. I had misunderstood message received earlier which said we had full text of his speech. This in fact referred to his speech at Brighton.

Heath explained that he did not repeat not think it would be proper to give full text because meeting in Paris was on very confidential basis, and it had been understood that any papers prepared for that meeting would not repeat not be distributed either by British representatives or the members of the Six. Harrison pointed out that it was not repeat not much use having a meeting of this kind if we were only to have a summary of one part of the speech as it was known that prepared texts had been the basis of the discussion in Paris. He did go on to say that he had noticed a good deal more in the press reports than had been available to us in the draft presented.

Heath said that this was one of the very reasons that he did not repeat not think they should give the text. He referred to a report in London Times today from their Paris correspondent saying that Commonwealth ambassadors were dissatisfied with the information they had received from Heath when he met them together after the meeting there. He said this was quite untrue, and that there had been a general expression of satisfaction with the information given. While our own ambassador in his telegram to Ottawa did not repeat not express dissatisfaction, he certainly indicated that no repeat no real information had been given.

I followed Harrison by pointing out that unless we had the full text and knew the context within which the statements regarding Commonwealth, summarized in the document forwarded to you, had been made, then it was impossible to form any very clear opinion of the basis on which Commonwealth might expect their problems to be dealt with. It also left us without any information as to the extent to which Heath had indicated to the representatives of the Six that the rights of Commonwealth should be preserved.

Other High Commissioners indicated their support of the demand for the full text, and it seemed that every representative there held the same opinion, although there was of course no repeat no formal record.

Sandys, who was acting as Chairman, then took this up and said that in their opinion it would be creating a dangerous precedent if this text were circulated, because in the coming negotiations beginning on November 8 it would be necessary to exchange many papers on various detailed points. Harrison expressed the opinion that it would be a dangerous precedent not repeat not to have it, because we would know so little of the real effect of the summary we had received and of the basis on which Britain is approaching the negotiations.

In the strictest confidence, and I think it should not repeat not be passed on to Australia either through their representative in Ottawa or otherwise at this time, Harrison informed me that he is sending a telegram to Menzies urging him to make a direct request to Macmillan for the production of the full text of Heath’s speech as the only possible basis for further discussion of this subject. I mention this because I thought you might consider it advisable to discuss this with Prime Minister in view of my impression from our conversation last night that you believe we should have the full text. You might wish to suggest to Prime Minister that a similar message be sent from Ottawa.

I shall write to you tomorrow in further detail, but I wanted you to have this information immediately because I did give you the impression last night that we had received the full text. It seems strange to me that Commonwealth governments should be denied the opportunity to see this basic statement of British intentions and then be expected to gain any useful information from discussions such as we had today. In fact I would go so far as to say that without this information today’s meeting was completely valueless. Warmest regards.

[G.A.] DREW

532. D.M.F./Vol. 136

Minister of Finance to Prime Minister

SECRET Ottawa, October 19, 1961

My dear Prime Minister:In the welter of current public discussion of the negotiations between the United Kingdom and the European Economic Community, I think it is imperative that we should not lose sight of the relationship of the United States to this problem. As you know, I discussed it frankly with Mr. Dillon and Mr. Ball in Vienna immediately following the meeting of the Commonwealth Economic Consultative Council at Accra last month.The policy of the United States Administration is rightly or wrongly being interpreted as favouring accession of the United Kingdom to the Community. I was assured by Mr. Dillon and Mr. Ball that the Administration’s attitude is neutral in this respect, regarding the decision as one entirely for the parties directly concerned. Mr. Ball made no attempt, however, to hide the fact that the United States regards the maintenance of the Commonwealth preference system unfavourably. I believe they were impressed with my report on the Accra Conference and the prospect of a serious weakening of the Commonwealth and the consequences this would have for certain of the Commonwealth countries which are numbered among the “uncommitted” nations.I have had a paper prepared in this Department on this subject and enclose it herewith. It emphasizes the desirability of presentation of the Canadian point of view to the United States Administration and the danger that in this situation the United States may derive a very substantial benefit, not paid for, in the reduction of the Commonwealth preference system. I believe the importance of the matter warrants direct discussions with the Administration at Washington. I know this opinion is shared by Mr. Hees. I expect, of course, to see Mr. Ball in Paris at the O.E.C.D. meeting in mid-November, but earlier discussions would appear to me to be justified by the seriousness of the situation.I am writing to our colleagues Mr. Green and Mr. Hees to the same effect.

Yours sincerely,[DONALD M. FLEMING]

[ENCLOSURE]

Memorandum by Department of Finance

SECRET [Ottawa] October 16, 1961

U.K. Negotiations with the Eec: the Role of the United States

The negotiations between the U.K. and the EEC begin in Brussels early in November. It is difficult to judge how long they will last, but it cannot safely be assumed that they will last a year or more. Mr. Heath recently said he saw the negotiations as a matter of months, not years.There is increasing evidence that the United Kingdom Government is determined to reach an agreement with the Six at almost any cost. It is clear from the recent discussions in London with officials of Commonwealth Governments that the United Kingdom assessment of what are “essential” Commonwealth interests is much narrower than the assessments of the individual Commonwealth countries. It is noteworthy too, that in its initial presentation of its application to the Six last week in Paris the United Kingdom indicated that it saw no need for amendments to the Rome Treaty and thought the special arrangements that would be needed could be taken care of in a protocol or protocols. Against this background it would seem reasonably likely that the United Kingdom will succeed in negotiating an agreement with the Six. Any such agreement is most unlikely to include special arrangements to deal with more than a very limited number of Commonwealth interests, especially if the United States adheres to its present attitude that the preferences must go and that derogations from the Rome Treaty should be minimal.If the United Kingdom joins the EEC Canadians trade interests in the United Kingdom market will inevitably be impaired. The degree of impairment will depend very much on the terms under which the United Kingdom joins the Community. Injury to Canada would be minimized if the United Kingdom were able to negotiate zero Community tariffs on the affected raw materials, and a continuation of present access for agricultural and manufactured products, including of course preferences over the United States and other outside suppliers. Terms such as these are unattainable, partly because of the attitude of the United States. A situation which would in any case have been very difficult for us is made doubly difficult by the United States attitude. The influence of the United States, whether thrown in one direction or the other, is still substantial. Is it not worth considering whether the United States attitude could be shifted in a direction more favourable to our interests and the interests of the Commonwealth as a whole?The United States have consistently seen the European Economic Community as a political achievement of great value to the western world. They have looked upon it as a source of unity in Europe and therefore a source of strength from a strategic point of view. From the point of view of economics they have always been impressed by the advantages of bigness, real and supposed, and they conclude that a European attempt to create a customs union in the United States’ own image is bound to be beneficial.If the United Kingdom is willing to accept the political objectives of the Six, and does not attempt to water down the common purposes and institutions of the Community the United States would welcome United Kingdom membership in the EEC. They believe however that extensive derogations from the Treaty to accommodate the special problems of the United Kingdom and the Commonwealth would weaken the Community. They also have a more selfish reason for not wishing to see derogations. They point out that the entry of the United Kingdom into the EEC will mean a considerable increase in discrimination against the United States. As compensation for this they are seeking the permanent abandonment of the tariff preferences which the United Kingdom and Commonwealth countries accord each other. (It is not clear that they have considered how the Commonwealth countries, all weaker and poorer than the United States, could be compensated). They evidently take it for granted that if the preferences accorded by the United Kingdom disappear, those accorded to the United Kingdom will also disappear. Indeed they are probably more interested in getting rid of preferential rates in the Canadian tariff than in the United Kingdom tariff. In short, they are looking for major trade advantages for themselves in Canadian and other Commonwealth markets, as a windfall, with no quid pro quo on their part.This is surely a narrow and short-sighted approach to the situation created by the United Kingdom negotiations with the EEC. It ignores the very real problems created for Commonwealth countries and therefore for the Commonwealth as an association. The United States with the interests it has in the “uncommitted” nations of the world ought to consider carefully the serious impact this development can have on such countries as India, Ghana or Nigeria if special arrangements are not made to meet their needs. Australia and New Zealand, the only two reliable allies the United States has in the South Pacific, can suffer serious damage if their needs are not met. While Canada might be damaged less severely than some others, relations between the United States and Canada stand to suffer very seriously if the United States takes a stand which makes it impossible for the United Kingdom to attempt to protect Canadian interests.We seem to be faced with the prospect of the two most prosperous industrial units in the world, the United States and the European Economic Community, about to carve for themselves large slices of the United Kingdom and Commonwealth markets at the expense of the underdeveloped members of the Commonwealth and of trusted friends and allies, Australia, New Zealand and Canada, whose strength and prosperity depend far more on foreign trade than is the case with the United States or the Six. This is not compatible with the kind of leadership the United States must provide. What kind of leadership do we want from the United States? First, of course, a recognition of the broader implications of these negotiations for individual Commonwealth countries and for the Commonwealth as an association. But assuming these had been recognised, what then? We would then want the United States to throw its considerable influence in the direction of persuading the Six that the terms of United Kingdom entry must be such as to take Commonwealth interests fully into account, with whatever special arrangements this might entail. It must be recognized however that this effort, even if whole-hearted, would fall short of full success. Even with much better terms than now seem at all likely, the access of Commonwealth countries to the United Kingdom market will be considerably impaired. Somehow compensation must be provided in other markets. There are only two large markets to look to in this connection – the Six and the United States. If the members of the Six can contemplate free trade among themselves they really have no need to maintain a tariff against the rest of the world as high as the agreed Common Tariff (Indeed before the Dillon round of tariff negotiations began, the Six themselves had talked of the desirability of following it with a further round a year or so later). So far the Dillon round has been disappointing, largely because of inadequate United States authority to make adequate offers. A further and much more extensive negotiation between the EEC and the United States is clearly necessary. What would the Commonwealth countries have to offer in a general attempt to mitigate the effects of U.K. entry into the EEC? As was indicated earlier the United States and the Six would be the beneficiaries of any erosion of the Commonwealth preferences. Whatever the settlement between the U.K. and the Six some of the Commonwealth preferences in the U.K. are bound to disappear or be diminished. To the extend that this is so, the Commonwealth countries will have equivalent margins of preference in their own tariffs to offer in the context of a general settlement. These are the margins the United States has been hoping to get rid of without payment and no doubt the Six have had the same thought. Both must be persuaded that the continuation of a tolerable system of international trade for the smaller countries will depend upon their willingness to seek a general settlement of these problems on a basis which takes account of the interests of all concerned.To the extent that it proved successful a general settlement of this kind could make a considerable contribution not only to maintaining good relations between the Commonwealth countries, the United States and the Six, but could also alleviate the internal strains within the Commonwealth that might otherwise threaten this institution. No real solutions to the problems created by United Kingdom entry into the EEC can be found within the Commonwealth itself. The United Kingdom for its part could expect some advantages from the United States which might serve to offset some of its own loss of advantages in Commonwealth markets. Moreover, the “European neutrals,” Sweden, Switzerland and Austria, all but forgotten in recent weeks, which are bound to suffer from the break-up of EFTA, could look to this scheme for the solution of some of their trading problems in Europe. They have already indicated to us that they plan to air their special problems in the OECD. Indeed, the OECD might be the right place to launch some of these ideas. The group of countries which would have to play the principal roles in this whole scheme look, in fact, rather like Senator Fulbright’s “concert of Atlantic Nations.”From the United States this will require not only a basic change of attitude but also new legislative authority in the tariff field going well beyond what has been available in recent years. The United States Administration are now working actively on ideas for new tariff-negotiating legislation. They have in mind particularly the need to get better access to the EEC. They appear, however, to need some imaginative goals in order to infuse new fresh vigour and vitality into their appeals to Congress. The objectives sketched in this memorandum might well provide the focus they need. We know that a number of new techniques for tariff negotiations are under consideration in Washington and that the Administration is receiving mixed counsel. If at the right time we were to put forward a scheme along the lines we have described we might precipitate out of the present uncertain situation a new and forward-looking enterprise in which all concerned – the United States, the Six, the European neutrals, the United Kingdom and the other Commonwealth countries would all be playing their appropriate parts.

533. DEA/12447-40

Secretary of State for External Affairs to High Commissioner in United Kingdom

We fully share the concern which you have expressed (and which has been reported from Wellington and other Commonwealth capitals) regarding the amount of information being disclosed to Commonwealth representatives regarding Britain’s current discussions with the Six. As you will be aware we have attached great importance, both privately and publicly, to the fullest degree of consultation as Britain’s exploratory discussions or negotiations proceed. It has always been our understanding (as reflected in the communiqué after the Sandys’ visit) that the judgments which the U.K. will have to make from time to time will reflect such consultations. Similarly, the development of our own views would be assisted by the fullest possible information on Britain’s discussions with the Six.

You should therefore attend or be represented at the briefing meeting which I gather the British government in holding in London tomorrow with representatives of Commonwealth countries. You should press very firmly for the fullest disclosure respecting negotiations to date in view of their importance and interest to Commonwealth countries.

At the same time you will of course wish to avoid associating us with Britain’s negotiations with the Six and you will want to be careful not to expose us to pressure from Britain for premature indications of our attitude on particular points. If it is suggested that we are being unreasonable in asking for information without being prepared to give any information ourselves, the answer would seem to be simply that it is Britain and not Canada which is engaged in negotiations. Accordingly it is not surprising that Britain should be asked for full disclosure even though Canadian and other Commonwealth representatives may not be able to say anything new about the views of their governments at this stage.

[H.C.] GREEN

534. DEA/12447-40

High Commissioner in United Kingdom to Prime Minister

TELEGRAM 3961 London, November 5, 1961SECRET. CANADIAN EYES ONLY. EMERGENCY.(For immediate personal delivery to Prime Minister at 24 Sussex Drive – no repeat no other distribution).Warmest congratulations on very successful tripFootnote 48 which has been well reported here and on continent.

Reason for this message is possibility you may be considering today question as to whether Canada should be specially represented at Brussels during coming week and information just received that Amory has been instructed to try discreetly to bring this about.

During your absence statements made here indicating full consultation with Commonwealth governments and full information regarding Heath’s statements to ministers in Paris. This of course is incorrect. For your consideration would recall that subject now before European Community representatives at Brussels is British application for membership under Section 237. As we could not repeat not under any circumstances join in application for membership which is limited to “European nations,” reasons for special representation are not repeat not clear. For some considerable time our ambassador in Brussels has been the accredited ambassador to European Community, and with his supporting technical staff would appear to be in a position to deal with any subject which might arise in relation to the Community. Suggest that special representation in association with British Delegation, which I understand is being urged by British Government, could create impression that we had been fully associated with negotiations and such results as may be achieved, although we have not repeat not yet been informed what measure of protection of Commonwealth interests they actually hope to achieve.

On more than one occasion Macmillan gave assurances that there would be full and effective consultation with governments of Commonwealth. On June 1 he said “We will have full consultation with them before deciding what course to follow in relation to EEC.” On June 27, when Silverman asked Macmillan to assure the House that no repeat no decision had been taken even to enter into negotiations, let alone on what would happen after negotiations had taken place, Mr. Macmillan said “Yes, Sir … we are going to consult with Commonwealth on the whole position before reaching a decision.”

You will recall that on at least two occasions you stated in the House in Ottawa that Sandys’ visit did not repeat not constitute “consultation,” but that those would only be exploratory talks. No repeat no consultations such as those promised have yet taken place, and in fact there has as yet been no repeat no firm response to your own request to Macmillan, when the subject of British application for membership was first discussed this spring, for information as to their exact position. There has as yet been no repeat no attempt by British Government to spell out even in moderately precise terms whether protection of Commonwealth trade means protection of the whole trade, or if only a part some indication of what that part might be.

They have gone a long way and left little doubt that the decision to join European Community has already been made, subject only to refinement of detail, contrary to the numerous assurances which were given. Had any doubt remained on this score it was removed by these words in the Speech from the Throne last week “My government will make every effort to bring to a successful conclusion the negotiations which they are undertaking with EEC.”

Under these circumstances may I suggest the possible advantages of having no repeat no formal association with British delegation which is in Brussels for the specific purpose of supporting their application for membership which under no repeat no circumstances we can directly share. It does seem that some emphasis can be placed on the fact that our relationship with EEC, which is the only direct relationship open to us, is already covered by the presence in Brussels of an experienced ambassador formally accredited to the Community and supported by an efficient technical staff.

May I further suggest the possible desirability of a strictly personal letter to Macmillan pointing out that the course followed has not repeat not conformed to your understanding of the procedure that was assured, and the possible danger to harmonious British-Canadian relations if it should become necessary for you to make a public statement indicating Canadian dissatisfaction with the lack of consultation and their failure to provide us with information sufficiently specific for Canadian Government to understand what their intentions really are.

To such extent as it may now become necessary in the meantime to make any public statement, may I suggest that as the country which in fact produced the concept of the modern Commonwealth in 1867, we have special reasons for being devoted to the maintenance and strengthening of Commonwealth for sentimental reasons as well as practical reasons. Having regard to numerous statements made here, I do think this would be helpful, and emphasis might also be laid on the fact that Canada has sought to place no repeat no barriers in the way of British development in which we have such a close and abiding interest, but that with our deep concern for the future of Commonwealth which has now become the most hopeful international association in the world, we do want to know and are still waiting to learn what course is being proposed and what the effect of British participation as a member of European Community would have on the future of the rapidly expanding Commonwealth.

Warmest personal regards.

[G.A.] DREW

535. DEA/12447-40

High Commissioner in United Kingdom to Secretary of State for External Affairs

As Heath had undertaken at meeting of High Commissioners on October 13 to consider my request for the delivery of a text of his statement to the Ministers’ Meeting in Paris on October 10, and had said that he would let me know the result of their consideration of this request, I wrote to him on October 27 reminding him of this assurance and asking what their decision was.

Yesterday I received a reply stating that they had carefully considered the request I had put forward on behalf of the Canadian Government, but that they had decided they could not repeat not let us have this text.

I then had a letter delivered immediately to Heath saying that while we wanted the text, if we could not repeat not have this would they give us a written summary.

A letter written by Heath was delivered to me at noon. In this he repeated the statement that they were not repeat not prepared to go beyond the summary relating to that part of his statement in Paris dealing with the Commonwealth, and that he thought that what had been said at the meeting of High Commissioners on October 13 gave us sufficient information. In his letter he said “I did in fact say all that there was to say at this stage.” The fact is that he has given us no repeat no additional information in regard to the real details of what he said in Paris beyond the original summary of that part relating to the Commonwealth.

The High Commissioners have been asked to attend a meeting at three o’clock next Friday afternoon, November 10, to hear Heath’s report of his discussions at Brussels which begin tomorrow morning.

It does not repeat not seem to me that without either the actual text of his statement in Paris or a comprehensive written summary of that statement there is any possibility of interpreting the summary of what he said about the Commonwealth entirely out of the context in which it was given.

If you share my views I hope you will instruct me to make a very firm protest on November 10 in regard to the withholding of essential information while at the same time inviting us to meetings of the High Commissioners which are interpreted in the press as being for the purpose of fully disclosing to us what has taken place.

[G.A.] DREW

536. DEA/12447-40

High Commissioner for United Kingdom to Secretary of State for External Affairs

CONFIDENTIAL Ottawa, November 14, 1961

Dear Mr. Green

I have been asked to send you the enclosed message from Duncan Sandys. A copy of the message has been given to George Drew.

Yours sincerely,DEREK AMORY

[ENCLOSURE]

Secretary of State for Commonwealth Relations (United Kingdom) to Secretary of State for External Affairs

CONFIDENTIAL [London], November 14, 1961

Now that the Common Market negotiations have begun I think you may care to have, in addition to the full information we shall be giving you through normal official channels, messages from me from time to time to give you my personal assessment of how things are going especially from the point of view of the Commonwealth interest.Mr. Heath saw the Commonwealth High Commissioners here last week on his return from Brussels and you will no doubt have had an account of what he told them about the Ministerial meeting with the Six.In any negotiations it is always a tricky business to get the discussions launched on a satisfactory basis. This I think has now been achieved. We have agreed on terms of reference which will enable officials to get down to brass tacks and in particular to grapple with the issue of Commonwealth trade which everybody recognises to be the heart of the problem.We have been encouraged to find that the Six accept the need to protect vital Commonwealth interests and have shown themselves ready to examine the various possible solutions we have put forward. On the other hand, the Six and the Commission naturally look at the problems raised by our application for membership in the light of the interests of the Community. They are concerned that the conditions of our entry should not undermine the cohesion and balance of the Common Market and, as they put it, that exceptions should not take the place of rules.For this reason they thought it would be difficult to apply in any wholesale manner the Morocco solution which was designed to deal with a very limited problem.They naturally would like to find solutions restricted to the transitional period, rather than permanent exceptions which would give Commonwealth countries a privileged position in perpetuity. Mr. Heath took them up on this and emphasised that while transitional arrangements might suffice for some Commonwealth problems, others would call for arrangements of a continuing character. The Six have adopted as realistic and moderate an attitude as we could reasonably have hoped.The Ministers had quite an argument about procedure, which reflected the differences between the point of departure of the two parties. We wanted to take the Commonwealth problem in its various aspects as the starting point, they wanted to start from the common external tariff as the main element in the structure of the Common Market. It was finally agreed that officials should in effect tackle the problem from both aspects in parallel. This should enable us to avoid the obvious danger of getting bogged down in detailed discussion of the tariff.We are not too disturbed by the fact that the Six do not wish to discuss agriculture until after the end of the year in view of their need to reach some agreement about a common agricultural policy if they are to pass to the “second stage” of the operation of the Treaty of Rome on the 1st January. The signs are that any agreement they may reach will be of a pretty limited character and will not prejudice our discussions with them. We are in touch privately with the Commission and individual Governments of the Six and in this way can ensure that our views are known before they make their decisions.As regards the political discussions going on in the Fouchet Commission there has been a lot of publicity about the French draft. From what we know of the French proposals (and they are not the only ones in the field) they do not contain anything which would be in any way inconsistent with the maintenance of our established political relations within the Commonwealth. I hope you will send me at any time any thoughts you may have about the negotiations as they proceed.

Wormser (Quai d’Orsay) attended a dinner party at the Embassy on November 17 in Mr. Fleming’s honour and dealt at some length with France’s view of recent EEC developments and particularly Britain’s application. Although Wormser did not repeat not touch on new points of substance, his remarks to Mr. Fleming comprised an up-to-date summary of the French position.

Wormser began by describing the French conception of the EEC. It was a regional customs union; more than that it was a closely integrated economic union, an exclusive club designed to discriminate in favour of its members and against non-members. Later, in a colourful analogy, he compared the EEC to a French country house with a formal garden surrounded by a wall through which there was only one gate (the Rome Treaty); it thus illustrated a fundamental difference between the French approach to European unity and that of the British, who were accustomed to informal gardens that were not repeat not enclosed.

In Wormser’s view it was open to question whether the EEC was perhaps already too large to work in the way in which it had originally been conceived. The Six already included the most important economic powers on the continent and the Common Market had been so successful that it was causing changes in world trading patterns and widespread anxiety among those who were excluded. Moreover it was perhaps already too large to preserve its homogeneity and further expansion would certainly pose a serious threat to the original concept of the EEC. If it were expanded to include Britain and the EFTA countries, what would be left out? Only USA, Canada and Japan among the important industrialized countries of the free world, and where was the process to stop? It was clear from Prime Minister Macmillan’s public statements that he was thinking of Britain’s entry as only a step in the direction of an Atlantic Community. Although he did not repeat not say so in so many words, the pretty clear implication of Wormser’s remarks was:

that he thought it would have been better if Britain had never applied for entry into the EEC; and

that he would be unalterably opposed to any further expansion beyond Britain and the other EFTA countries.

Wormser went on to explain that the immediate issue posed by Britain’s application was the question of additional protocols to the Rome Treaty. This issue had been clouded until now because Mr. Heath’s statement in Paris had been so cleverly drafted that it had been almost impossible to pin down the British position. With the opening of negotiations on the problems of the common external tariff and the Commonwealth however it was becoming increasingly clear that there was a gap between the British position and that of the Six which would be hard to bridge. Put baldly Britain wanted important permanent derogations from the Rome Treaty while the Six were prepared to accept only transitional exceptions limited in time and scope. Reverting to his analogy, Wormser said that they could not repeat not afford to expand the Common Market “garden” to include Britain unless the garden wall was the same around both Britain and the Six.

In this situation France and her EEC partners might be forced in future negotiations in Brussels into taking positions that appeared negative and unsympathetic to Britain and the Commonwealth. Wormser did not repeat not see how the Commonwealth preferential system could be integrated into the Rome Treaty. He emphasized that he fully recognized the political importance of the Commonwealth and that he found it particularly awkward to have to choose between the EEC and the Commonwealth at a time when there was such a need for Western utility. It was for this reason that he called representatives of certain Commonwealth countries to the Quai d’Orsay last week (our telegram 1441 November 14† refers). France was anxious to warn Commonwealth countries that the negotiations with Britain would sooner or later have to come to grips with this problem.

Wormser confessed that at this stage he could see no repeat no way out of the impasse. He did think however that when the trade interests of countries other than Britain and the Six were going to be on the table at Brussels it would be difficult to reach a final settlement without the direct participation of those countries. He also referred in very general terms, as he had to us before, to the possibility of concessions from Canada in return for EEC concessions in the external tariff on items of special interest to us. Later he developed this thought by speaking in terms of an average external tariff on such items (e.g. for aluminium a reduction in the CET from 9 percent to from 4 to 6 percent. At no repeat no point did he specify what sort of concessions Canada might be asked for.

Wormser saw no repeat no possibility of permanent arrangements for the Commonwealth which would in effect discriminate against USA. The Americans had already made it clear to the French Government that they would expect to receive from the enlarged EEC treatment no repeat no less favourable than that granted to the Commonwealth. On the other hand the French were following with great interest USA Administration’s efforts to launch a broad trade liberalization program. Timing would be crucial however because the difficulties facing negotiations in Brussels would probably be clearly defined by the end of this year.

On agriculture, Wormser confirmed the importance attached by the French to the so-called Kojeve Plan (our telegram 1435 November 14† refers). In support of this plan he tried to demonstrate that the French domestic price for grain was more appropriate as a “just price” for international trade purposes than the present international price, and that it was really against the interests of exporting countries like Canada to accept low international prices and to pay subsidies to the farmers when they could realize the same income by selling slightly smaller quantities at a higher price. In any case he anticipated that when the proposed variable levy system was established the exporting countries would be forced willy-nilly to abolish their agricultural subsidies. The French intended to press on with their proposed initiative at the GATT Ministerial Meeting and felt that they had received no repeat no discouragement from USA or from Australia. Wormser also confirmed that the main lines of the CAP were to be established by January 1 next and that Britain would play no repeat no part in its formulation (“the formation of EFTA enabled us to have a Common Market; the British application has given us a common agricultural policy”).

Wormser was relaxed and forthcoming throughout the evening and appeared delighted with this opportunity to inform Mr. Fleming of current thinking in Paris. He answered questions freely but made it very clear that French negotiators in Brussels would not repeat not be in a position to facilitate arrangements in the Commonwealth’s interest.

[PIERRE] DUPUY

538. D.M.F./Vol. 137

Record of Meeting between Minister of Finance and Director of Economic and Financial Affairs, Ministry of Foreign Affairs of France

CONFIDENTIAL [Ottawa, n.d.]

This was a talk which proceeded at the Canadian Embassy (residence) on Friday evening, November 17, following a dinner given by our Ambassador, Mr. Dupuy. In the hope of an intimate discussion Mr. Dupuy had kept the dinner to a very small party. Mr. Baumgartner, the French Minister of Finance was detained at the last minute before the Senate in connection with his budget. Mr. Wormser was, therefore, the only non-Canadian guest. Also present were Messrs. Dupuy, Plumptre, Warren, Halstead and Kniewasser.

Mr. Plumptre has written a memorandum dated November 20† on the Conference and we also have a excellent telegram dated November 21 from Mr. Dupuy reporting on the meeting. This present memorandum may, therefore, be regarded merely as supplementary to these two sources.

Mr. Wormser was very forthcoming in our discussion. He spoke with extraordinary frankness and with little indication of reserve. The discussion, which was held in the Library, opened at once on Common Market subjects and continued for two hours. It proceeded entirely in English. I found it extremely valuable.

Mr. Wormser began by expressing the opinion that the Common Market is already big enough, if indeed it is not already too big. France entertained doubts about its wisdom before its formation. Time is now needed for digestion without undertaking large changes. He stressed that there are great problems to be faced and questioned whether it will work successfully if it becomes too big.

I drew attention to the policy of the E.C.M. and our concern in regard thereto. I referred to the size of our trade with the Common Market quoting figures. I stressed the closeness of Canada’s relations, both economic and political, with the six Common Market countries, stressing that we are not only friends but allies in NATO. I stressed the importance for Canada of outward-looking policies on the part of E.C.M. Mr. Wormser indicated his awareness of the nature and extent of Canadian interests and relations with the Six.

Mr. Wormser laid stress upon the fact that France has followed protectionist policies for hundreds of years. The people have been brought up in that atmosphere. He expressed the opinion that the French Parliament would not approve the entry of the United Kingdom into the Common Market unless protection is maintained.

This reference to protectionism naturally led next to a comment on French agricultural policy. Mr. Wormser readily conceded that the policy is protectionist and that the French farmer wields great political influence and that he is very vigilant.

The next reference naturally was to wheat. Mr. Wormser threw out a suggestion that effort might be made to meet existing problems by achieving agreement on a world basis involving a world price and that taxation be used to absorb the difference between the domestic and the world price. He did, however, concede that the use of taxation in such circumstances would involve very great political difficulties.

On the subject of the proposed United Kingdom entry into membership in the Common Market, Mr. Wormser was prepared to agree that there were political advantages in having the U.K. as a member, but stressed the difficulty of reconciling interests. He instanced the difference in the French and British views of the garden, a very significant allusion which is examined in Mr. Dupuy’s telegram. In referring to the prosperity of the Six he agreed with me that it was not all attributable to their having formed the Common Market. He agreed further with me that the prosperity of France at any rate was in part attributable to the French financial reforms of three years ago which would have been beneficial whether France was in or out of the Common Market. He added that Mr. Khrushchev had also contributed greatly to the prosperity of the Common Market by his policies which have driven so many of the enterprising people from East Germany into West Germany where they had been a very important factor in the prosperity of the West German Republic.

Mr. Wormser also agreed that the views of France would be very influential in determining the attitude of the Six in the negotiations with the United Kingdom.

Mr. Wormser’s comments upon the British proposals to the Common Market were particularly interesting. He spoke of Mr. Heath’s statement at Paris on October 10 on behalf of the British Government in opening the negotiations as “the most mysterious puzzle.” He said it extended to about sixty-two paragraphs, that it is full of contradictions, that it gives nothing away and that it did not say anything that did not appear to be withdrawn in some other part of the document. He expressed glowing admiration for the presentation as a work of diplomatic art which leaves open so many escape doors.

Concerning the interests of the Commonwealth I reviewed briefly the basis of our interests and our concern. Mr. Wormser indicated that transitional provisions to ease the inevitable difficulties might be considered but that no departure from the scheme of the Common Market with its common external tariff would be acceptable. Any provision to facilitate economic adjustment, though necessary, could not in his view be permanent.

Finally, in relation to the content of Canada’s exports Mr. Wormser addressed himself particularly to the subject of raw materials. He stated that the French and Canadian conceptions of what constituted raw materials do not coincide. He singled out aluminum in this respect, stressing that in the French view aluminum was a processed product and could not be regarded as a raw material.

DONALD M. FLEMING

539. D.M.F./Vol. 137

Record of Meeting between Minister of Finance and President of France, November 17, 1961

CONFIDENTIAL [Ottawa, n.d.]

President Charles de Gaulle received me in his private office at the Palais Élysée. The appointment had been arranged by our Ambassador Mr. Dupuy, and Mr. Dupuy informed me that President de Gaulle had put aside another appointment in order to meet with me. Our meeting lasted one half hour. Only an interpreter was present with us and as we conversed directly in French he took no part except to supply a translation of the English word “background” for which he afterwards told me there is no counterpart in the French language.

The meeting was most cordial. I had had the privilege of accompanying President de Gaulle on his visit to Canada a year and a half ago and this aided greatly in the atmosphere of this meeting. I brought the President greetings from the Governor General and the Prime Minister which he warmly appreciated.

The President opened with a comment on the O.E.C.D. meeting. I gave him a brief report on the meeting and then, to my great gratification, he switched directly to the subject of the E.C.M.

First, the President inquired of me as to Canada’s attitude toward the proposed entry of Great Britain into the Common Market. I said that in the view of the Canadian Government it is a matter for decision by the United Kingdom, but on the invitation of the British Government we had had exchanges of views and these had been frank. I referred to our concern for Canadian and Commonwealth interests and the apprehension which had been voiced by all Commonwealth countries concerning the negotiations. I said also that we acknowledged the political values of the Common Market, that we wished to see Western Europe strengthened, but we did not wish to see the Commonwealth weakened. The President commented incisively “We are willing to have the United Kingdom in the Common Market, but not the Commonwealth.”

The President then asked me why I thought the United Kingdom wished to join the Common Market. I replied that I believed it was because her entry would give more political strength to Western Europe, and avoid political isolation of the United Kingdom from Europe. He asked me why Britain should risk damage to the Commonwealth. I replied that I understood Britain would wish to have a foot in each camp, i.e., the Commonwealth and the Common Market. He then pressed me to indicate what Britain’s choice would be between the two. In reply I drew attention to the firm statements which Mr. Macmillan and other British ministers have made that if it came to a choice between the Commonwealth and Europe, Britain would choose the Commonwealth. I commented, however, that I did not believe any such simple choice would present itself. It would rather be a case of Britain deciding whether or not to enter the Common Market on the terms which might be negotiated with the Six.

President de Gaulle then raised very directly the subject of wheat, which is so important to French interests and attitudes. He asked me for the price at which Canadian wheat is being sold in Europe in a manner which indicated again that France is very sensitive to the competition of Canadian wheat with French wheat. I stressed the importance to the Canadian economy of our wheat exports, instancing our sales to the United Kingdom, Japan, West Germany and now China.

I spoke of our trade with the Common Market countries. I stressed that we are not only friends but allies and expressed a desire to extend our trade with the Six. I quoted figures on the extent of the present trade. I emphasized the importance for Canada and other countries of the adoption of outward-looking policies by the Six. I also referred to the difficulties which we have been having in the GATT negotiations at Geneva in working out tariff agreements with the Six. President de Gaulle indicated he was quite aware of these difficulties and their relationship to the agricultural policy of the Six.

I referred to the indications of a new initiative on the part of the U.S.A. and asked if such an initiative might not offer the possibility of achieving agreements that would provide for the freer flow of trade in the area of the Atlantic Community. He immediately questioned what the chances might be of President Kennedy obtaining the required authority from the United States’ Congress in view of protectionist interests there. I agreed that the initiative would encounter very serious difficulties in that quarter.

On the subject of wider trade in the Atlantic area I stressed that Canada is the only Commonwealth country in NATO apart from the United Kingdom and that our trading interests are world-wide, Canada being the fourth greatest trading country in the world and the first on a per capita basis. It would be necessary for us in the approach to any freer trade in the Atlantic area to have regard to our trading interests with Japan, the Commonwealth countries, Latin America and other parts of the world.

The meeting concluded very cordially. The President asked me to convey messages of greeting to the Governor General, the Prime Minister and Mrs. Fleming.

The impression the President left with me was one of awareness of the issues involved and firmness in relation to the protection of French interests. The clear impression that he made on my mind was that he has no desire to accommodate the interests of the Commonwealth, that he fears the competition of Canadian wheat for French wheat, that for the sake of political advantages he is willing to admit the United Kingdom into the Common Market, but that there will be no yielding in favour of Commonwealth interests.

DONALD M. FLEMING

540. D.M.F./Vol. 137

Record of Meeting between Minister of Finance and Prime Minister of United Kingdom, November 20, 1961

CONFIDENTIAL [Ottawa, n.d.]

My meeting with Mr. Macmillan was held in the Cabinet Room (temporary) at Admiralty House. It lasted for one half hour. The two of us met alone. Mr. Macmillan was most cordial.

I brought Mr. Macmillan the greetings of our Prime Minister. Mr. Macmillan referred to Mr. Diefenbaker’s visit to Japan with interest. I gave him a quick report on it.

Mr. Macmillan then referred to the O.E.C.D. meeting in Paris last week. I gave him a quick report on it stressing that it had been very useful and harmonious. I referred to the role played in it by the Chancellor of the Exchequer.

I then referred to the U.K.-Common Market negotiations. I stressed our double concern over (a) the importance to Canadian interests of the course and outcome of the current negotiations, and (b) the stories in the press in the U.K. and Canada suggesting that there was discord between our two countries. I said these reports were doing much mischief. I said I realized the U.K. Government had no control over the U.K. press, but that it seemed to me the only time when news from Canada finds its way into the U.K. press is when an attempt is made to allege that there is some kind of “crisis” in Canada or in U.K.-Canada relations. Mr. Macmillan agreed saying “We have the same trouble” and “We are press-ridden Governments.”

I affirmed that we had always recognized that whether the U.K. joins the Common Market or not is a matter for decision by the U.K. Government and for it alone. However, when the views of the Canadian Government have been sought they have been given frankly.

I said that from the tenor of recent speeches of Mr. Macmillan and others it appeared that the British Government is determined to enter the Common Market. Mr. Macmillan immediately denied this. He said that there had been no change in the Government’s position in this regard and no decision had been taken. Moreover, no decision would be taken until after the negotiations had shown what terms would be attached to U.K. entry into membership. Mr. Macmillan said that it was a political decision and that he had always thought that the economic problems involved could be overcome. He stressed this statement by making it three times. Emphasizing that it is a political decision he said that unless Europe gets together then within thirty years Germany will be Communist and France chaotic and powerless and the Western world will be doomed. Western Europe exists on a tiny peninsula of the Eurasian land mass. He said “We must succeed in these negotiations. It is necessary for political reasons.”

I said that the Canadian and Commonwealth interests are deeply involved in the negotiations, indeed, that they were at stake. I referred to the promises of Mr. Macmillan and others to protect Commonwealth interests in the negotiations and said that there had never been any question about our accepting the good faith of the U.K. Government in making these promises. I said that we rely on them and referred to our Prime Minister’s recent speech at Halifax to this effect. I added, however, that I questioned whether in these negotiations the U.K., even with the best will in the world, could succeed in its efforts to protect Commonwealth interests. I referred to my talks last week in Paris. I expressed the view that France will be the most influential of the Six in determining their position, and Mr. Macmillan did not disagree. I said that my impression of my talks in Paris was that there would be no yielding on the part of France to make terms with the U.K. which would accommodate Commonwealth interests. I expressed the view that the French wish to have the U.K. in the Common Market, but not the Commonwealth. At this Mr. Macmillan evidenced no surprise, but merely said “We must try.” I mentioned that the subject of wheat was raised by the French in my Paris talks just as soon as mention was made of the interests of the Commonwealth.

I pointed out that we have not been told by the U.K. what in their view constituted the protection of Commonwealth interests in these negotiations and said that we had on several occasions, including the Accra meeting, asked for some indication of the quantum which was in the mind of the U.K. Government. To this Mr. Macmillan made no response.

I then turned to the subject of consultation. I said we were naturally anxious to be kept informed as fully as possible. I referred to Mr. Heath’s opening statement at Paris on October 10 setting forth the position of the U.K. Government. I said “you have furnished us with a summary of a portion of this speech. I should like to renew our request for the text.” Mr. Macmillan replied “Maybe we made a mistake in not giving the text to the Commonwealth Governments at the time. The statement, however, was not prepared for circulation.” He added that if it were to be given out it would be necessary to give copies to 15 Commonwealth countries, 6 EFTA capitals and other organizations of the E.E.C. Then the U.S. would expect a copy and then Argentina and other countries. I suggested that the Commonwealth countries might be expected to keep the document confidential, but Mr. Macmillan replied that he considered that impossible. I mentioned that perhaps quite unnecessarily the failure to give the full text to the Commonwealth countries had given rise to feelings that they had not adequately been taken into the confidence of the U.K. Government. He nodded and repeated “Perhaps we made a mistake.” I merely renewed the request for the text. Mr. Macmillan gave no conclusive answer.

Mr. Macmillan stressed that the E.C.M. must be outward-looking in its economic policies. I warmly agreed and referred to the difficulties we are experiencing with the Six in our present GATT negotiations at Geneva. I stressed the importance of Canada’s very large trade with the E.C.M., and said that all six countries were our friends and our allies in NATO and that we are anxious to extend our trade with them. I expressed concern over the protectionism which characterizes the agricultural policies of the Six and the concern evidenced by French leaders over wheat in my talks last week with them.

I referred to the evidence of new initiatives at Washington. I said that we in Canada were prepared to attach considerable importance to them, being as close as we are to the U.S., while recognizing the problem of protectionist sentiment in the U.S. Congress. I interpreted the U.S. attitude following my talks with Mr. Ball as favouring wider agreements and freer trade with Europe but with no membership in or partnership with the Common Market. I suggested that a U.S.A. initiative, if it came soon, might be made to help to reconcile interests of the Commonwealth with British membership in the Common Market.

I told Mr. Macmillan of Mr. Diefenbaker’s willingness to come over to London in the early future for the ostensible purpose of fulfilling some engagement, and this might lead to useful talks. Mr. Macmillan took up this point at once and made a note of it. He said “He might come and make a speech” and asked about a date. I suggested early January.

The meeting concluded at the end of the half hour on a very cordial note.

DONALD M. FLEMING

541. DEA/12447-40

Private Secretary to Prime Minister of United Kingdom to Private Secretary to High Commissioner in United Kingdom

CONFIDENTIAL [London], November 22, 1961

Dear Private Secretary,You will be aware that, when he saw the Prime Minister on November 20th, Mr. Fleming asked Mr. Macmillan to consider whether a copy of the Lord Privy Seal’s opening statement to the Six of October 10th could not after all be given to Commonwealth Governments, and said that if this were possible it would disperse the genuine anxiety which was felt. The Prime Minister undertook to consider this request.I am writing now to let you know that, having considered the matter as he promised to do, Mr. Macmillan has decided that the British Government should adhere to its decision that, for the reasons which have already been explained, it would be better not to give verbatim copies of the text or of similar documents arising in the course of the negotiations to any governments that are not directly parties to them.Lord Amory has been requested to pass this information to Mr. Fleming in Ottawa.

Yours sincerely,F. MILLS

542. DEA/12447-40

Extract of Telegram from High Commissioner in United Kingdom to Secretary of State for External Affairs

The Daily Express and the Daily Mail reported in splash front page play this morning that the United States has the full text of Mr. Heath’s Common Market speech of October 10 which has been withheld from Commonwealth countries. The Times, in a much more guarded story, had a short item saying reports of this nature were abroad but that there was no confirmation from the Foreign Office or USA sources in London. The Daily Express headlined its report “Common Market: Canada protested, and now … shock over US ‘leak.’ Washington gets facts barred to empire.” The Daily Mail headline read “Six in leak shock. US has full text of Heath’s market speech. Now Sandys faces new rumpus.”. . .

543. DEA/12447-40

High Commissioner in United Kingdom to Secretary of State for External Affairs

TELEGRAM 4220 London, November 24, 1962

SECRET. CANADIAN EYES ONLY. OPIMMEDIATE.

Copy for immediate personal delivery to Prime Minister and Minister of Finance.For the Minister.

Now that Mr. Macmillan has refused the request by Mr. Fleming for the production of the text of Heath’s statement in Paris on October 10, and it has now been disclosed that this statement is in the hands of the USA Government, I would like to have a clarification of our position in regard to this document.

You will recall the very strong protest forwarded by New Zealand and reported in Wellington telegram 396 October 26 to External,† in which it was stated “that New Zealand Government was far from satisfied at failure of UK Government to make available even a full summary of all of Heath’s statement which will set pattern for negotiations.” There was the further message from Canberra in telegram 300 October 26 to External,† in which it was reported that “Australians made a strong request earlier this month in London for the full text of Heath’s statement at UK-EEC pre-negotiations.”

There was also your telegram G-308 October 30 to me, which in fact contains the last firm instructions I have received on this subject. In that telegram you said “As you will be aware we have attached great importance both privately and publicly to fullest degree of consultation as Britain’s exploratory discussions or negotiations proceed. It has always been our understanding (as reflected in communiqué after the Sandys’ visit) that the judgments which UK will have to make from time to time will reflect such consultations. Similarly the development of our own views would be assisted by fullest possible information on Britain’s discussions with the Six. You should therefore attend or be represented at the briefing meeting which I gather British Government is holding in London tomorrow with representatives of Commonwealth countries. You should press very firmly for the fullest disclosure respecting negotiations to date in view of their importance and interest to Commonwealth Governments.”

The meeting did in fact take place on November 10. Following your instructions I did write to the Lord Privy Seal prior to that meeting expressing the hope that they would give us the full text of his statement in Paris on October 10. That request was refused.

Since the same request to Mr. Macmillan by a minister representing Canadian Government has also been refused, I would be grateful if you would let me have your instructions regarding the course now to be followed in view of the fact that there will doubtless be another meeting called after Mr. Heath’s return from Brussels in a few days. Perhaps I should add that I shall certainly be there myself as I have finally thrown off the severe chest cold which has been bothering me for more than two weeks.

[GEORGE] DREW

544. DEA/12447-40

Memorandum from Special Assistant, Office of Secretary of State for External Affairs, to Assistant Under-Secretary of State for External Affairs

Ottawa, November 27, 1961

Mr. A.E. Ritchie:The Minister told me this morning that he had instructed Mr. Drew to attend any further meetings called by Mr. Heath following the latter’s return from Brussels. This seems to dispose of paragraph 5 of London telegram 4220 of November 24. I checked with the Minister as to whether any reply was needed to that telegram, and he said it was not. I am, therefore, returning your draft G-328 of November 25† and all copies of it.

R. C[AMPBELL]

545. DEA/12447-40

High Commissioner in United Kingdom to Secretary of State for External Affairs

CRO reached us Saturday evening to tell us of decision by UK ministers that full text of Mr. Heath’s October 10 statement in Paris be released to Commonwealth and EFTA governments. Statement is being reproduced over week-end and we should have a copy Monday morning. Please let us know if you want text by teletype.CRO said their covering letter is expected to say that Heath statement remains classified and that its release to governments not repeat not engaged in Brussels negotiations is not repeat not a precedent.

546. DEA/12447-40

Memorandum from Secretary of State for External Affairs to Prime Minister

CONFIDENTIAL [Ottawa], November 28, 1961

Britain and the Eec: Mr. Heath’s Statement of October 10, 1961

You may be interested in the attached comments prepared in the Department on the full text of Mr. Heath’s statement of October 10, 1961, which became available today.Footnote 49

H.C. G[REEN]

[ENCLOSURE]

Note

CONFIDENTIAL

BRITAIN AND THE EEC: MR. HEATH’S STATEMENT OF OCTOBER 10, 1961

The British Government has now made the complete verbatim text of Mr. Heath’s statement available to all Commonwealth and EFTA governments, on the understanding that this is an exception to the arrangements protecting the secret nature of the working papers of the negotiations. We have examined it to ascertain to what extent it adds to the information already obtained from summaries and oral briefing sessions of Commonwealth governments by the United Kingdom Government. The following are our tentative comments.All the essential points made by Mr. Heath in Paris seem to have been covered in the summaries and oral briefings. In particular, the summary of the parts of the statement dealing with Commonwealth issues, which was given to Commonwealth governments before delivery, not only provides a fairly accurate and detailed account but, for the most part, paraphrases the full text.Three points, however, would appear worth noting:

The general tone of the speech is much more conciliatory towards the Six than could be gathered from the summaries. Without glossing over the difficulties, the British Government seems to have made an all-out effort to impress on the Six how strong is its desire to reach a settlement meeting the requirements of the Rome Treaty. The statement emphasizes Britain’s intention to play its full part in the development of all aspects of the Common Market. On the other hand, the statement contains stronger language concerning the safeguarding of Commonwealth interests than that used in the summaries. (“I am sure that you will understand that Britain could not join the EEC under conditions in which this (Commonwealth) trade connection was cut with grave loss and even ruin for some Commonwealth countries.”) Nonetheless, Britain’s opening position would seem to fall short of those which New Zealand, Australia and Canada described to the United Kingdom as being minimum positions for safeguarding their interests.

In order to illustrate the problems raised for the Commonwealth by Britain’s accession to the Rome Treaty, the statement describes some of the specific difficulties that would be experienced by several Commonwealth countries. While those of Canada are not described in detail, general references are made to each area (materials, manufactures and agriculture) where our main difficulties would arise.

The statement contains background information on Britain’s position and on a number of secondary issues (e.g., position of Ireland, Britain’s system of agricultural supports) which is of interest. It provides a more detailed view of Britain’s opening position than could be gathered from information obtained previously.

547. J.G.D./XIV/E/167.2

Extract of Memorandum from Prime Minister of United Kingdom to Prime Minister

SECRET [London], November 28, 1961

As you know President de Gaulle has just been to stay with me for 36 hours at Birch Grove House and, although the visit was private, we naturally had conversations about the present world situation concentrating mostly on Berlin and the Common Market negotiations.. . .

Regarding the Common Market negotiations President de Gaulle was not unsympathetic. He quite recognises the importance for the free world of the countries of the old Commonwealth, which he distinguishes from the African and Asian members (with the possible exception of India). He appeared to think that it would not be impossible to devise satisfactory economic arrangements to meet our preoccupations about the Commonwealth, although of course he was quite unspecific as to details. He was also quite definite in saying that he would like the United Kingdom to be able to join the Six. His difficulty however is that he feels that if Britain were to join the Six while maintaining the Commonwealth connection (which he admits to be valuable) the present character of the European Community would be altered and its political purpose might be undermined. I argued against this pointing out that it was surely in Europe’s interest to assist Commonwealth countries, that the necessary exceptions to the Treaty of Rome would probably amount to only a small proportion of total European trade and that the future development of the Community must in any case depend on its inherent strength, which would surely be increased by British adherence with all our overseas links. I also urged him not to think that the negotiations could drag on for a long time; if Europe took a narrow view of the position, there would be a revulsion against the idea of allied unity which could only damage the free world as a whole. I do not know what impression our arguments made but I got the feeling that President de Gaulle would like to see a solution if he could adjust his mind to what must be to some extent a new view of the European Community. As our talks were in the nature of a private exchange of views, we only propose to give a restricted account of what happened to the various allies and I should be grateful if you would therefore keep this message to the smallest possible circle.

British-EEC discussions are approaching the end of their preliminary or explanatory stage and will soon move into negotiating phase. This seems an appropriate time to take stock of the situation and to speculate on prospects.

The position which British had maintained up to now is that, on the one hand, they have declared their readiness to accept Rome Treaty and the political objectives of Community as outlined in July 18 Bad Godesberg Declaration. On other hand, British emphasized the value of Commonwealth and stressed the importance of trade between Commonwealth countries as one of the strongest elements in maintaining that association. Mr. Heath said that Britain could accept the general structure of Common External Tariff of Community and generally the common policies for agriculture and other areas covered by Treaty of Rome. He suggested that Commonwealth interests could be safeguarded by association, reduction in CET and special protocols.

The Six for their part, have warmly welcomed Britain’s decision to seek membership in EEC, but they have strongly emphasized the European and corporate character of their community. They stressed the need to safeguard its dynamism, the careful balance under Treaty between benefits and disadvantages and the equilibrium of its economic, social and political objectives. They have firmly stated that they are not repeat not prepared to accept a dilution of Rome Treaty which would threaten to deter Community from its goal. Hence any special arrangements for Commonwealth countries would have to be limited in time, coverage and geographical areas.

The first rounds have thus brought out a basic difference in outlook. Britain tried to establish the principle that existing Commonwealth arrangements shall be maintained and negotiations confined to specific exceptions requested by Community. On other side the Six maintain that Britain’s accession to EEC calls in principle for the elimination of all British preferential trade and economic arrangements though Community will be prepared to negotiate within stated limits, certain exceptions for Commonwealth. The question that arises is which side will give.

We believe the give will come from British side. From a negotiating standpoint the position of the Six appears to be much stronger since it derives in part from the fact that their Community is already in existence and is based on a ratified treaty whose provisions serve as legal and practical limits to the area of negotiation. Furthermore, their Community is a success as is attested by the number of outsiders who are now seeking to enter. Finally, the negotiating position of the Six is strengthened considerably by USA support for the Rome Treaty. British, on other hand cannot repeat not count on help of those among the Six who actively support Britain’s entry for they are precisely the “integrationists,” or on the support of USA who have made it clear they don’t want Community to be weakened. Mr. Heath could argue that it was Britain’s decision to seek membership in EEC which moved USA Administration to launch a new approach to American trade policies; if the Six should make it impossible for Britain to join EEC USA Congress might not repeat not follow the Administration. To this the Six would reply that the best way to insure against a reversal of American thinking was for Britain to join under terms of Rome Treaty. The position of the Six is particularly strong in the field of manufactured products though less strong in some other sectors, such as association and tropical products where their position does not repeat not derive so directly from Treaty.

In these circumstances it seems to us there are two possible courses for British to follow in the next phase of negotiations. The first one would be to propose lists of priorities under the following types of possible solutions: (a) tariff-free quotas; (b) delayed alignment of BP rates of duty to CET; (c) lowering of certain rates in CET; (d) association status for a limited number of underdeveloped countries and territories of Commonwealth; (e) perhaps a few purchase commitments; and, finally (f) perhaps arrangements providing for indefinite continuation of preferences for very few items of limited trade value. The best Canada could hope for under this approach would be something like the following: (1) zero or low rates of duty for a limited number of products (mainly industrial materials); (2) some tariff-free quotas in British market and perhaps, in a few cases, in the markets of the enlarged Community; (3) special transitional arrangements of some kind under which our preferences in British market would be eliminated gradually over a fixed period; (4) perhaps, for very few unimportant items, arrangements maintaining preferences for an indefinite period; and perhaps, (5) other concessions in CET through negotiations.

A second course which Britain could follow would be to concentrate for time being on reductions in CET, tropical products and association. After settlement of these issues, at least in principle, British could then seek to lump all or most of the remaining Commonwealth problems, including notably manufactured products, under an arrangement which would have the effect of postponing a final decision until a later date. This might be possible under a protocol which would be subject to review at a certain date in future, as mentioned to use by Von Staden (Hallstein’s Chef de Cabinet) and reported in our telegram 786 November 16.†)

Of the two alternatives the latter would seem to be the less dangerous for Canada and more promising for the success of the initiative for the reduction of trade barriers on a world-wide basis;

it would postpone decisions which if taken now, would be particularly unfavourable for Canada e.g., the transformation of preferences into reverse preferences involving in some cases differentials of over 30 percent;

it would provide a breathing spell which could help to dissipate existing difficulties and improve the climate;

it could provide an inducement for USA Congress to come through with liberal trade legislation; and,

by the time “special arrangements” for Commonwealth would come up for review damage to Commonwealth trade might be minimized by progress towards “free trade for the free world.”

The above is the simplified pattern emerging in our minds after talks in Commission, with Deniau in particular. He feels that what is most important in negotiations with Britain is to maintain the “force motrice” of Community, for it was the Rome Treaty as it stands which was forcing USA to revise their trade policies. Talking about the real difficulties posed by the existence of the Commonwealth and EFTA Treaty, he said he had not repeat not ruled out the possibility of some firm arrangements coupled with a “declaration of intent” between EEC and Britain. It might be possible this way to safeguard the integrity of the Rome Treaty, to restrict damage to Commonwealth countries and to enhance the possibilities of rapid reduction or elimination of tariffs on a broader basis.

It seems to us that one conclusion which needs to be drawn is that British-EEC negotiations should be conducted in constant awareness of their impact on the new USA initiative and that no repeat no important decision including that on manufactured products should be taken without calculating their effect on progress of the initiative in Washington. From our talks here we have the impression that Commission is more aware of this factor than British.

549. DEA/12447-40

High Commissioner in United Kingdom to Secretary of State for External Affairs

This afternoon I have received a copy of a Confidential telegram dated December 2 from CRO to British High Commissioner in Ottawa, Canberra and Wellington, on the above subject.

In view of past delays I thought I should forward text to you at once.

Text is“Last weeks discussions in Brussels made it quite clear that we cannot repeat not expect to make any progress on treatment of manufactured goods from industrially advanced Commonwealth countries so long as we go on insisting on the principle of maintaining existing arrangements for their entry (free of duty or at preferential rates) into Britain. Indeed, to continue to do so is liable to be counterproductive. We had of course foreseen this and had warned Commonwealth governments in our consultations with them that we should not repeat not be able to maintain this line. Paragraph 39 of the Lord Privy Seal’s statement of October 10 is relevant.

Our assessment is that the best course will now be to explore with the Six, without commitment, the various possible measures within the ambit of the Treaty of Rome which might be applied to the various items of this trade in order to offset or mitigate the effect of adopting the Common Tariff. In other words, the purpose of the study would be to consider, product by product, what difficulties would be likely to arise and to find ways of dealing with them.

We are likely to express readiness to proceed as above at the Ministerial Meeting on December 28. The contemplated study would then no repeat no doubt be remitted to officials of the seven governments and European Commission. Although the study would be without commitment, questions of the relative importance of various items, of priorities between them and of the various alternative methods of dealing with them, are bound to come up for discussion. We shall need advice from Commonwealth governments on these questions if we are to get the best results in their interests.

Please explain position to Commonwealth authorities as above and say that we can count on their cooperation. We hope that they will put their representations in Brussels and for London in a position to give us prompt advice on these matters.

Please further explain to Canadian/New Zealand authorities that one possible course which was brought up for consideration in September consultations with Commonwealth was idea of “basket” quota for manufactures in respect of which trade in individual items is too small to merit individual duty quotas. Under such a scheme an overall quota for groups of items would be fixed possibly with maximum figures fixed within it for separate items to prevent undue concentration on a few of them. The scheme would probably have to be administered by the exporting country. Canadian/New Zealand Government should know that this may well be among proposals we shall wish to study. It was not repeat not raised formally at meetings with Canadian officials in September but we were asked informally whether we had considered it. It is originally an Australian idea.

We are considering arranging a meeting shortly in London with representatives of the three Commonwealth countries to examine this idea.”

[GEORGE] DREW

550. DEA/12447-40

Secretary of State for External Affairs to High Commissioner in United Kingdom

As you will have seen from Mr. Hees’ message,† Warren and Lane from the Department of Trade and Commerce will arrive in London to participate in the meeting on December 12. I assume that you will have already informed Mr. Sandys of this decision. If not you may now wish to do so.

For your information ministers here have agreed generally that Warren should be guided by the following terms of reference:“That such officials express disappointment and concern that the British authorities seem prepared to accept the view of the Six that continuance of existing arrangements for free and preferential entry of Commonwealth manufactured goods to the UK market is not a practical possibility;That such officials should limit their participation to the provision of technical comments and statistical and market information;That such officials make it clear that their participation is entirely without prejudice to the general position of the Canadian government on any aspect of the current negotiations or their outcome.”

Warren will of course proceed with great circumspection and caution in these discussions. Warren will be in touch with you on arrival.

[H.C.] GREEN

551. DEA/12447-40

High Commissioner in United Kingdom to Prime Minister

STRICTLY PERSONAL AND CONFIDENTIAL. London, December 15, 1961

My dear John [Diefenbaker]:I fully realize the extremely delicate problem of interpretation of the Common Market situation until it takes a clearer form. However, there is one aspect of this problem which I am inclined to think has become obscured in the minds of many of those who are discussing this problem in the British House of Commons, and which has a very direct bearing on the extent to which the British Government has any right to go in committing itself in any way which would affect the Ottawa Agreements of 1932.When Mr. Macmillan placed a resolution before the House of Commons seeking approval of the application of the British Government for membership in the Common Market under the Treaty of Rome, the resolution adopted by Parliament on August 3rd last which gave him his precise mandate, and a mandate which has never been extended, was in these words:“That this House supports the decision of Her Majesty’s Government to make formal application under Article 237 of the Treaty of Rome in order to initiate negotiations to see if satisfactory arrangements can be made to meet the special interests of the United Kingdom, of the Commonwealth and of the European Free Trade Association; and further accepts the undertaking of Her Majesty’s Government that no agreement affecting these special interests or involving British sovereignty will be entered into until it has been approved by this House after full consultation with other Commonwealth countries, by whatever procedure they may generally agree.”May I emphasize that this mandate was given only under the following explicit undertaking: “… that no agreement affecting these special interests (the interests of the Commonwealth) or involving British sovereignty will be entered into until it has been approved by this House after full consultation with other Commonwealth countries, by whatever procedure they may generally agree.” The British Government has implicitly, if not in precise terms, already made very substantial commitments. As was reported in my telegram No. 4467 of December 12th,† Heath went still further and used the following words during the briefing he gave the High Commissioners on Monday last: “I cannot give an undertaking that at no time will it be necessary for us to make a decision in part before dealing with the whole.” I am sure the wording of the resolution I have underlined accounts for the fact that in the House of Commons and in public statements Heath and other members of the Government have insisted on referring to the meetings, at which the High Commissioners are given a mere summary of what has taken place, as “consultations.”At the meeting last Monday I pointed out that this term had been used, and I asked if it was the intention of the British Government to make any statement to the press following the meeting. Heath said that a statement would be made and that if this were not done there would be loose speculation. After a very brief discussion it was agreed that the statement should go no farther than to say that the representatives of the Commonwealth Governments in London were briefed by Mr. Heath on last week’s European Common Market meetings in Brussels. Reference was made to this again before the close of the meeting, and it was definitely understood that the statement would not go beyond that.When the press representative of the Commonwealth Relations Office gave a statement to the press, it did go beyond that. The following is the quotation from the Daily Telegraph of Tuesday, December 12th:“Representatives of the Commonwealth High Commissions in London were yesterday briefed by Mr. Heath, the Lord Privy Seal, on last week’s European Common Market meetings in Brussels.“The meeting was part of the agreed arrangements for Commonwealth consultation on the Common Market. Another part of this consultation will be meetings in London over the next few days between Commonwealth officials and experts from the various British Ministries concerned.”You will see that in the second paragraph these words were included: “The meeting was part of the agreed arrangements for Commonwealth consultation on the Common Market.”I think it is obvious that this breach of a clear understanding and this particular wording, which is in no way justified by the nature of the meetings which by no stretch of imagination could be regarded as consultations, indicates an attempt to create a firm impression in the minds of the members of the British House of Commons that there has been, in the words of the resolution, “full consultation with other Commonwealth countries, by whatever procedure they may generally agree.”I have not taken up this last case of calculated misinterpretation, and it is not my intention to do so. It did seem to me, however, that in view of the announcement that Heath is going to be in Ottawa, I should explain to you just what has been taking place. This is not a case of careless wording. After the first of the three briefings which have been given, Heath used the word “consultation” in the House of Commons to describe that meeting of the High Commissioners. In a very polite and friendly letter I pointed out to him that this was obviously not consultation, but merely briefing. With that in mind the statement given to the press by Alastair Scott of the Commonwealth Relations Office last Tuesday does have some special significance.I am not so much concerned with the fact that the members of the British House of Commons may have the wrong impression, but I am concerned about the possibility that by the constant repetition of the statement that these “briefing” meetings in London are “part of the agreed arrangements for Commonwealth consultation on the Common Market” may form the basis of an argument that these meetings of High Commissioners were accepted by the Commonwealth Governments without challenge as “full consultation with other Commonwealth countries, by whatever procedure they may generally agree” in accordance with the terms of the motion approving the British application under Article 237 of the Treaty of Rome.I do suggest that this may have reached a point when it could become extremely important, from the point of view of Canada’s future position, that a private letter go to Mr. Macmillan pointing out what the terms were and also making it clear that there has been no agreed arrangement for consultation, and that no such consultations have taken place. I can easily imagine a situation arising in which the British Government would argue that these meetings had been described on a number of occasions as consultation under an agreed procedure, and that in the absence of any objection on the part of the Commonwealth Governments they had assumed that this interpretation of the meetings of the High Commissioners was acceptable to the Governments of the Commonwealth. There is the further point that these reports, effectively distributed in Canada by the United Kingdom Information Service through its branches in Ottawa, Quebec, Montreal, Toronto, Winnipeg, Edmonton and Vancouver, as well as by mimeographed information releases, could contribute still further to the misunderstanding of this problem which was so carefully created through these same agencies in the first instance. I might add that to my personal knowledge Scott, the Information Officer of the Commonwealth Relations Office, has been extremely busy implanting in the minds of representatives of Canadian newspapers in London, as well as our radio commentators, the very kind of ideas which have found their way into our own newspapers at home. That may be regarded here as a legitimate method of dealing with a subject of this kind, but, whatever our opinion may be in that respect, it does seem to me that it is something which should not be overlooked. It may be of interest to you, for instance, that I know without any uncertainty that during the time Duffy was writing his completely false reports from LondonFootnote 50 he had on one evening spent two hours with Alastair Scott at his own house. I mention this only to indicate that the United Kingdom Information Service is not playing with kid gloves.Having regard to the wording of the motion which authorized the British Government to make its application, and the pattern of official reporting which is appearing in the press, I do venture to suggest that there might be some reason, when expressing confidence in Mr. Macmillan’s assurances, that your statement in that respect would be to the effect that you have full confidence in Mr. Macmillan’s undertaking that no agreement affecting the interests of the Commonwealth will be entered into until there has been full consultation with the other Commonwealth countries, by a procedure upon which they may generally agree. My thought is that this would only be stating in explicit terms exactly what Macmillan’s undertaking actually is, that there could be no conceivable objection to a clear statement of those words, and that their use would prevent any misunderstanding in the future as to the basis upon which confidence has been expressed.

All of the best.Yours ever,GEORGE DREW

552. DEA/12447-40

Office of High Commissioner in United Kingdom to Under-Secretary of State for External Affairs

LETTER NO. 1925 London, December 29, 1961

CONFIDENTIAL

Reference: Our telegram 4468 of 12th December.†

Britain and the E.E.C.: Meeting on Manufactured Items, London, December 12, 1961

The Board of Trade have provided minutes of the meeting held on December 12 in London for the purpose of a technical discussion of the Australian proposal for a “basket” scheme for dealing with exports of manufactured goods from Canada, Australia and New Zealand. As agreed at the meeting, the Board of Trade have prepared a “commentary” on the paper circulated by the Australian representatives and on the discussion.

We are attaching three copies each of the minutes and the commentary;Footnote 51 we are sending one copy of each to the Canadian Embassy, Brussels, one to the Commercial Division, London, and are retaining one for our records.

Mr. Brown said that, at a meeting in September, Australian representatives had put the idea of “basket” quotas forward as a suggestion for securing continued free entry to Britain for minor manufactured goods for which individual arrangements could not be made. The suggestion had been discussed at the time with Australian officials only. The purpose of the present meeting was to discuss the technical aspects of the proposal jointly with Australian, Canadian and New Zealand officials, and in particular to see whether they could offer any advice on, for example, its practicability and possible coverage. This technical discussion would be without prejudice to the questions of policy involved.

Mr. Warren said that he should make clear the terms of Canadian participation in the meeting. The Canadian Government had been extremely disappointed at what appeared to be the United Kingdom Government’s apparent acceptance of the Six’s view that the present Commonwealth preferential arrangements could not be continued in the event of British entry into the Common Market. Canadian participation in the present meeting would be limited to providing statistical and technical information and should not be seen as implying any agreement with the principles involved or as prejudicing the attitude of the Canadian Government on this matter.

Mr. Warwick Smith said that Australian officials were still only exploring the idea. They had not yet put it to Australian Ministers and indeed could not do so without a good deal of detailed examination of the products concerned. They would not wish to put this work in hand unless it were clear that the idea had attractions for the other Commonwealth countries concerned. They had not expected that it would come up for discussion at such an early stage, since it was intended to deal only with the residual items for which it was not found possible to make individual arrangements. Its extension to other items should not necessarily be ruled out, but this would alter the nature of the arrangement.

Mr. Warren said the orders of magnitude of the trade involved in the case of Canada were different from those in the case of Australia and New Zealand. Canada exported $129 million of industrial manufactures (excluding newsprint and synthetic rubber) to Britain and $48 million of processed foodstuffs. Some of these exports were very large, but many were small; there were, for example, 268 items of which exports were less than $500,000. The question of which commodities should be treated as residual was therefore very important for Canada. In view of the pace of technological change, it would be very important that any arrangements for residual items should make allowance for the growth of exports and for new products. Where the competition to Canadian exports to Britain came from Europe, and where Canadian exports had been made possible only by the present preference, quota arrangements would not make it possible to maintain exports. Where the competition came from third countries quota arrangements would in effect maintain preferential treatment but unless allowances were made for growth, trade would be subject to a ceiling. Taking both these points into account, a “basket” scheme could not be represented as maintaining Canada’s existing position in the British market.

Mr. Durrant said the New Zealand authorities had only tentative views at this stage on the basket proposal; they attached particular importance to making the arrangements as flexible as possible and to providing for the growth of trade and for trade in new items. In general they hoped that arrangements for new exports would so far as possible be made on an individual basis.

Mr. Warwick Smith circulated a note describing the Australian suggestion. A number of technical points, arising out of the paper, were then discussed.

Mr. Warren asked whether the concept was an arrangement for the transitional period only or of indefinite duration. Mr. Warwick Smith said that the proposal was for indefinite duration although it was contemplated that the arrangements would be subject to renegotiation from time to time.

It was agreed that the Board of Trade would prepare a commentary in the light of the discussion, and circulate it to High Commissioners’ offices. (This commentary is attached).†

553. DEA/12447-40

Memorandum from Secretary of State for Commonwealth Relations of United Kingdom to Secretary of State for External Affairs

CONFIDENTIAL [London], December 29, 1961

Common Market Negotiations

It may be helpful to review the position after the first month of negotiation.

We have made progress on a number of points. Agreement has been reached on the general level of common tariff which would apply if Britain joins the Community. Study is under way of British requests for nil tariffs. A large amount of factual and statistical material has been collated by ourselves and the Commission and circulated to the other Delegations. The Conference has commissioned a study of manufactured goods from developed countries of the Commonwealth. As regards less developed Commonwealth countries, agreement has been reached on a method of studying the problems involved. Finally it is agreed that the British Delegation should begin to explore with the Commission the implications of the economic union articles of the Treaty of Rome. Much of this progress is of procedural or preparatory nature and is therefore unspectacular; it is none the less an essential preliminary to negotiations on substance. The scope and variety of the issues is so vast that the subject matter has to be, so to speak, pre-digested and broken down into manageable sections before the real policy discussions can start.The main problems on which we have not yet been able to start work are those of temperate agricultural products, of the common agricultural policy and of E.F.T.A. On the second of these delay was inevitable pending decisions the Six have to take between now and the end of the year, but there seems no reason to doubt that we shall be able to discuss agriculture with them in the New Year. The E.F.T.A. problem depends, of course, on the negotiations of the other members with the Six; these are unlikely to make much progress until our own negotiations are further advanced.Although no Delegation has adopted delaying tactics, the tempo of the meetings has not been fast for several reasons. These include the preoccupation of the Six with their move to the second stage of the transitional period which we expected to take place on the 1st January; their determination to maintain a united front in talking to us, thus involving themselves in many preparatory meetings; the absence of any precedents for our negotiations and the consequent need to invent procedures as we go along, and the complexity of the subject matter and the need for careful preparation in every field. But we hope that the pace will now quicken.The fact that the Commission was going to play a role of great influence in the negotiations was clear from the early meetings. But a more recent and positive development has been the establishment of a close working relationship between their Delegation to the negotiations and our own. The Conference is gradually falling into the habit of leaving it to our Delegation and the Commission to prepare the ground. The Commission have organised themselves well for these negotiations; they have appointed a Delegation of 12, who are divested of any other responsibilities and who report direct to the President of the Commission (Hallstein).As regards the Commonwealth, the Six have expressly recognised in general terms the importance of protecting vital Commonwealth interests and need to take this into account in their discussions with us. But we shall no doubt have to continue to press them hard to draw the logical conclusions.I think that a fair summing up of this month of negotiations would be that the preliminary task of refining the issues is going faster and in a rather more satisfactory way than we expected, though we have not yet reached the point where the whole picture is displayed and the big issues clearly emerge and neither side has moved from its initial position on the substance. The testing time is thus still to come.I think your Government will know most of the above from your representatives in Brussels and London whom we have kept very fully informed. But I thought you might like to have a summing up of the state of play as at the Christmas recess.

[DUNCAN SANDYS]

Part 3

Section A - Relations with Individual Countries

United Kingdom

Sub-section I

Visit of Prime Minister of United Kingdom, to Ottawa, April 10-11, 1961

554. DEA/50412-40

Minutes of Meeting between Prime Minister of United Kingdom and Prime Minister

Mr. Diefenbaker asked Mr. Macmillan if there was anything he wished to say arising out of his meeting with President Kennedy.Mr. Diefenbaker recalled that at the Commonwealth Prime Ministers’ Meeting there had been a marked difference of opinion as to President Kennedy’s views on China policy. At that time it was Mr. Diefenbaker’s own impression, borne out generally by Mr. Holyoake but challenged by Mr. Menzies, that within a month or so of his inauguration the President’s attitude on China had already hardened against change. Mr. Macmillan said that he found it difficult to form an accurate impression of President Kennedy’s attitude. The President’s position in the country was at the moment strong and he thought that there was a tendency in diplomatic circles to overrate the resistant power of Congress. For the first year or two at least it did not seem likely to Mr. Macmillan that disappointed politicians could seriously harm the President.

Mr. Macmillan went on to say that it was above all in the sphere of Far Eastern and Southeast Asian policy that the President was vulnerable to domestic criticism. In Laos, for instance, the new Administration had, he said, accepted the policy which the United Kingdom had been advocating for several years. This shift in United States policy, objectively sound though it was, had nonetheless given rise to serious practical difficulties. At Key West the President had spoken very frankly on this score and had shown himself acutely sensitive to accusations of appeasement as well as to the possibility that if the worst happened a Democratic Administration would again have been in office at the outset of a war. In response to Mr. Diefenbaker’s comment about growing criticism emanating from supporters of Mr. Nixon, Mr. Macmillan said that it would be very dangerous if President Kennedy were placed under political pressure on Southeast Asian policy. The Pentagon was still strong.

In a brief reference to the current situation in Laos, Mr. Macmillan said that there had been no reply from the Soviet Union to the United Kingdom proposals. He remarked on the unsuitability of Phnom Pehn as a site for the International Conference.On China, Mr. Macmillan said that the new United States Administration was faced with problems somewhat similar to those it faced in policy for Laos. The problem of recognition was much more complicated than it had been in 1950 when the United Kingdom Government recognized Peking. In particular, recognition could no longer be extended to Peking without an accompanying decision and pronouncement on Formosa. From the United States point of view, it was obviously essential to avoid any implication that Formosa was de jure a part of mainland China. In this regard the question arose whether there was such a thing as “the China seat” in the United Nations, or whether it was possible to have two de facto Chinas. Again, might it be possible to reach an arrangement combining the entry of the Peking Government into the United Nations with an enlargement in the number of seats on the Security Council, a course of action which would appeal particularly to the new nations?

There was discussion of the tactical situation which would arise at the next session of the General Assembly. Mr. Macmillan thought that the United States Administration realized that the moratorium procedure would no longer succeed. He had agreed with President Kennedy that it was necessary to discover a procedural substitute which would not place the West at a disadvantage. If for instance the Peking government were to refuse to enter the United Nations unless its right to Formosa were acknowledged, this would be a satisfactory position from the Western point of view. Mr. Macmillan said that in such circumstances he would be inclined to the line that it was not for the United Nations to decide claims of that kind. If, however, the tactical situation developed in such a way that the Nationalist Chinese vetoed the Peking Government’s entry, the West would be in a bad position.

There was a short discussion on trade with China. Mr. Macmillan gave figures of the increase in trade between the United Kingdom and mainland China and said that the United Kingdom Government was under continuing pressure from some sections of industry which believed that the revisions in CHICOM lists did not go far enough. Mr. Diefenbaker referred to the negotiations for the purchase of wheat and barley from Canada and speculated on the availability of foreign exchange to the Peking Government. Mr. Diefenbaker added that in recent days the representatives of the Peking Government had been requesting credit terms. Mr. Bryce said that the Peking Government has shown a clear desire to make payments in sterling rather than dollars. He assumed that the source of this sterling was the Soviet Union.Concluding his reference to Asian questions, Mr. Macmillan said that President Kennedy had asked the United Kingdom Government to play down the China issue as much as possible while the new Administration was in the process of thinking out its position. Mr. Macmillan said that he had agreed to do this to the greatest extent possible, bearing in mind the limitations imposed by announced policy.Mr. Diefenbaker invited Mr. Macmillan to comment on reports that the United Kingdom was being pushed into Europe. Mr. Macmillan said that there had been a remarkable change in United States opinion in the past year. Broadly speaking, the Republicans had wanted to exclude the United Kingdom from Europe; the present Administration very much wanted the United Kingdom in Europe, mainly it appeared because they regarded the United Kingdom as a reliable ally whose influence they would prefer to have exerted within rather than apart from Europe. Mr. Macmillan expressed gratification with this development in United States thinking. If the present split continued NATO would break up. De Gaulle might not live long and if he were to go Germany might again soon dominate Europe with the resultant dangers.Mr. Macmillan thought that the political obstacles were more important than the economic in obstructing the United Kingdom’s movement towards Europe. Asked by Mr. Diefenbaker to elaborate, Mr. Macmillan said that if the political will existed, the technical economic relationships among the United Kingdom, the Common Market and Commonwealth countries could be worked out by negotiation. The difficulty lay partly with France and partly, he implied, with Commonwealth countries which feared that United Kingdom entry into Europe would affect their trade adversely. Mr. Macmillan indicated that there might be a lessening in French opposition to the United Kingdom’s entry into Europe. A prosperous beginning in the Common Market had tended to remove the earlier objections of the French industrial leaders.Mr. Diefenbaker said, assuming the United Kingdom were to go into Europe, what would happen to Commonwealth preferences, particularly with respect to agricultural products? Mr. Macmillan said: “We would have to negotiate – that is why we have not joined.” Later in reply to a further expression by Mr. Diefenbaker of Canadian concern over the possible entry of the United Kingdom into the EEC, Mr. Macmillan admitted that the preferences in such an event could be reduced and went on to ask whether it was not better that the United Kingdom should join the EEC and become a live partner in a growing trade association than go bankrupt on its own and cease to be a profitable market. He saw the choice between the short run advantages of existing preferences with the longer term benefits of a larger and expanding market with lower preferences.Mr. Diefenbaker again asked about the political relationship which Mr. Macmillan foresaw between the United Kingdom and Europe. Mr. Macmillan said he was not frightened of European common institutions. If there was a tariff, it was necessary to have an institution to administer it. Nor did he have objection to President de Gaulle’s idea of periodic meetings of Heads of European Governments, although he had some reservations about the idea of a Secretariat to which the Dutch had already expressed strong objections. Mr. Macmillan referred to the WEU as a possible institutional framework within which the United Kingdom might be associated more closely with other Western European countries.Mr. Macmillan ended the discussion on European questions by remarking that de Gaulle was not a federalist but a confederalist. There was no question of a single parliament for Europe which would in any case be unacceptable to the United Kingdom. Mr. Macmillan indicated that he was strongly inclined to do a deal with President de Gaulle so as to secure the kind of European confederation with which the United Kingdom could live and to do it before de Gaulle died. In the course of these and earlier remarks, Mr. Macmillan referred on two or three occasions to his apprehension that Chancellor Adenauer’s successor was apt to be a more dominant personality than de Gaulle’s and Germany more likely to prevail than France in Europe.Mr. Diefenbaker enquired whether Mr. Macmillan and President Kennedy had reached any conclusions regarding a NATO Heads of Government meeting. Mr. Macmillan said that President Kennedy had not mentioned this subject but that there had been some discussion on the future of NATO. The new Administration were not attracted to the Eisenhower-Herter-Gates plan for making MRBM’s available to NATO. President Kennedy and his advisers understood the psychological reaction of President de Gaulle, who saw the Gates plan as an attempt to buy him off. Asked by Mr. Diefenbaker whether there had been any discussion in Washington of how to achieve satisfactory control arrangements in a nuclear policy for NATO, Mr. Macmillan said that this was a very awkward problem. He attributed most of the difficulty to President de Gaulle’s insistence on being regarded as a nuclear power and being placed on an equal footing with the other great powers.Mr. Macmillan recalled the different circumstances in which it might appear necessary to use or to consider the use of nuclear weapons. There was no question but that they would need to be used in retaliation against a nuclear attack by the enemy. A second situation, however, was not so clear, i.e. where there was a conventional attack in which at first the NATO forces would attempt to enforce a pause during which efforts would be made, perhaps through the United Nations, to bring about a settlement. The third phase would arise when conventional resistance could not hold the enemy. This was a stage at which the most difficult decision as to use by the Western countries might arise. Mr. Macmillan indicated that no solution had yet been found to this problem.Mr. Diefenbaker asked about Mr. Acheson’s emphasis on the need for an increase in conventional forces. Sir Norman Brook said that Mr. Acheson was talking in terms of priorities. In his view conventional forces should have first priority because inter alia the Gates plan would have exhausted more resources than the United States could afford to spend. Mr. Diefenbaker commented and Mr. Macmillan agreed that another argument adduced in support of an increase in conventional strength was to show that the West was not obliged to rely on nuclear power alone. Sir Norman Brook added that he thought that both President Kennedy and Mr. Acheson were strongly conscious of the positive danger of entrusting technical nuclear weapons to unit or formation commanders far removed from political control. Agreeing to this, Mr. Diefenbaker said that the United States military leaders were making fewer incendiary statements. Mr. Macmillan said that while this was true, President Kennedy had not yet firmly established his control.Mr. Macmillan said that Mr. Rusk had contributed a valuable and balanced presentation on the political aspects of NATO with particular reference to the importance of improving NATO consultation. Mr. Macmillan referred particularly to the idea of regional committees, possibly with the addition of non-members (e.g. certain Latin American governments might be associated with NATO discussions on communism in the Caribbean).Mr. Macmillan agreed with Mr. Diefenbaker that it was not feasible to think in terms of a collective NATO line at the United Nations.Mr. Macmillan said that there had been no discussion between himself and the President on the problem of the Secretary-Generalship of NATO.In a brief reference to Spain and NATO, Mr. Macmillan said that he “would not get away with supporting Spain’s admission to NATO in present circumstances.”Mr. Macmillan spoke briefly and somewhat pessimistically about the outlook for the Geneva nuclear testing talks. There was no indication, he said in reply to Mr. Diefenbaker, that the Soviet side was responding to the conciliatory moves made at the opening of the resumed negotiations by the United States. Mr. Macmillan recalled that the Soviet Union had even retreated from a position which they had taken earlier by revoking their agreement to the single administrator of the proposed control body. He linked this shift in the Soviet position to the tactics which Soviet representatives have been following at the United Nations. They had unearthed a half forgotten tenet of Marxism – that there is no such thing as objective man. The United States, Mr. Macmillan continued, would not accept a three-man control body each of which would have effectively a veto. There was some tendency in Washington against continuing the negotiations in view of the Soviet attitude, but Mr. Arthur Dean was trying to prevent the talks from being broken off at this time. Mr. Macmillan indicated that he hoped Mr. Dean’s efforts would be successful and said that the Russians might be playing a delaying game in the Geneva negotiations until they saw how things worked out over Laos.Mr. Macmillan said that the United States were very worried indeed about Cuba. He thought that Kennedy well understood the risks posed by poverty in Latin America as an invitation to the spread of communism. The President appeared to feel that the revolution in Cuba had been something different from the ordinary succession of sudden political change which had characterized Latin American politics. The Cuban Government’s involvement with the communist countries, however, increased the policy problem for the United States.Mr. Diefenbaker referred to the recent Presidential message on development aid and asked Mr. Macmillan if the President had spoken of the need for contributions from other nations. There was no substantive comment from Mr. Macmillan. Mr. Bryce said that the United States had given up the 1 percent of GNP formula with which they had gone to the recent DAG meeting but that they were hoping that the European countries and Canada would do more.Mr. Macmillan said that on the domestic scene President Kennedy would face a severe test in a few months. It was his hope in 1961 to complete certain major features of his domestic programme (e.g. schools). He would hope to avoid political conflict during this period. Mr. Macmillan estimated that unemployment in the United States might well rise and in reply to Mr. Diefenbaker’s question said that to his knowledge President Kennedy had not found measures to curb rising unemployment. Mr. Diefenbaker referred to the similarities in the employment problems in the United States and Canada. In both cases there was increasing trade and an increasing gross national product; yet in both cases unemployment was increasing. Mr. Macmillan said that he believed that the appointment of Mr. Dillon as Secretary of the Treasury had been intended to show that the new Administration proposed to follow orthodox monetary policies. Mr. Macmillan estimated, however, that the pursuit of orthodoxy could lead only to increased measures of protection harmful to the trading partners of the United States. The new Administration could be less protectionist if it was prepared to expand the economy but this was feared as likely to lead to domestic inflationary pressures.Mr. Macmillan said that his meetings with the President had been most profitable. He had been impressed by the President’s readiness to allow an argument to proceed around him. The President was not tied to his position papers; he was an intelligent conversationalist and a good listener.

555. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], April 11, 1961Present

The Prime Minister (Mr. Diefenbaker) in the Chair,

The Secretary of State for External Affairs (Mr. Green),

The Minister of Finance (Mr. Fleming),

The Minister of Trade and Commerce (Mr. Hees),

The Minister of Transport (Mr. Balcer),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of National Revenue (Mr. Nowlan),

The Minister of National Defence (Mr. Harkness),

The Minister of Fisheries (Mr. MacLean),

The Minister of Labour (Mr. Starr),

The Postmaster General (Mr. William Hamilton),

The Solicitor General (Mr. Browne),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of National Health and Welfare (Mr. Monteith),

The Minister of Agriculture (Mr. Alvin Hamilton),

The Minister of Defence Production (Mr. O’Hurley),

The Minister of Public Works (Mr. Walker),

The Associate Minister of National Defence (Mr. Sévigny),

The Minister of Forestry (Mr. Flemming),

The Secretary of State (Mr. Dorion),

The Minister of Northern Affairs and National Resources (Mr. Dinsdale),

The Minister without Portfolio (Mr. Halpenny).

The Secretary to the Cabinet (Mr. Bryce),

The Assistant Secretary to the Cabinet (Dr. Hodgson).Also present

The Prime Minister of the United Kingdom (Mr. Macmillan),

The Secretary to the United Kingdom Cabinet (Sir Norman Brooke),

The United Kingdom High Commissioner (Sir Saville Garner).

Discussions with the Prime Minister of the United Kingdom

The Prime Minister said he was glad that the Prime Minister of the United Kingdom had been able to visit Canada at this time and had agreed to meet with the Cabinet. He assured Mr. Macmillan that his presence was very welcome. Ministers would appreciate any remarks he might wish to make on the economic situation in Europe and on the international economic arrangements that were developing. Any observations on his recent conversations with the President of the United States would also be of particular interest.

Prime Minister Macmillan said he regarded it as an honour to be invited to speak to the Canadian Cabinet. This was the second occasion on which he had been given this privilege, and during his official journeys he had also met informally with the Cabinets of various other members of the Commonwealth.The main purpose of his visit to Washington had been to establish personal contact with President Kennedy. The central point discussed had been the relative positions of the Communist countries on the one hand, and, on the other, the Free World with the Atlantic Alliance as its inner core. During the past twelve years the western nations had barely held their ground, and that largely by means of N.A.T.O., but the Communist bloc had gained ground. Twelve years ago many observers had expected the Communist system to collapse, but no evidence impending collapse now existed. There were stresses, of course, as in any system: for example the organization of agriculture in the Communist countries was old-fashioned and its productivity was low. On the other hand, they had not lost control of any Communist country to the West and Austria was the only case of neutralization. The Russians considered that they had made a major error here in permitting this.The Communists had been far more successful than Western nations with their propaganda. They could obtain more credit with $50 worth of publicity than we could for $500. A case in point at this time was Cuba.President Kennedy had agreed in a general way that the Western nations needed better organization, not merely in military matters, but more particularly to achieve the maximum exploitation and development of the resources of the free world.The present position in the Atlantic Community was paradoxical. After the war, Europe was a shambles, Germany had just been destroyed, France and Italy were weak, and the Low Countries had just suffered a period of enemy occupation. With the aid of U.S. money and by their own efforts, European countries had now established one of the most powerful industrial machines in the world. Germany was reaping the fruits of defeat: its debts were gone, and most of its industrial plant was completely new and up-to-date.In the New World, on the other hand, the U.S. economy was not at a high level. The basic industries of that country were operating below full capacity, unemployment was high, and there was an atmosphere of uncertainty in economic matters. Canada’s economy had been influenced by this lack. President Kennedy’s testing time would arrive early in his administration, as he would have to show results within the next 6 to 12 months. Mr. Macmillan said he was confident that the President would succeed in doing so. One of the important questions was how he could expand the credit base of his country without producing inflation. The Americans were very sensitive about the dollar despite their vast gold reserves.

What were the lessons to be learned from the present economic situation?First, it was essential that a better central banking system for the free world be established in the near future. The present system was too prone to be affected by chance events. The recent German revaluation had led to a vast amount of speculative buying of deutschmarks and selling of sterling in the London market. Fortunately, the movements of speculators had been largely countered by concerted actions of the central banks concerned.Secondly, there was need for freer trade. Almost everybody favoured free trade in principle, but in fact most people wanted protection for their own goods. This pressure for restrictive measures could not be resisted unless the monetary and credit system made possible an expansion of production. If a country had more jobs than men, as the U.K. had, the major concern was not unemployment and tariffs but inflation and imbalances of payments. In these circumstances, public pressure for a reduction of tariffs would develop. The economic position of the free world would be bound to suffer if the nations began to set up trade barriers and to suggest that the purchase of imported goods was somehow disloyal. The Iron Curtain was one regrettable barrier: the situation should not be worsened by trade curtains between individual nations of the free world. But with high unemployment it was more difficult for governments to support freer trade and easier to justify restrictions on imports.The trend was and had been toward larger trading areas. The U.S. had prospered in the later nineteenth and early twentieth centuries because it was the largest free trade area in the world. During the great depression of the 1930’s, the Commonwealth countries had established another vast trading system based on trade preferences as provided in the Ottawa Agreement. This system had also been beneficial, though on occasion it had caused some embarrassment to its members. Since that time important changes had occurred. For example, the Ottawa Agreements had not contemplated the present situation in which Commonwealth members were flooded with low-cost imports from Hong Kong.During the past few years two more large trading areas had developed, the Six and the Seven. The Seven should now be called the Eight, as Finland had joined E.F.T.A.; this was a source of satisfaction, because Russia had been expected to prevent Finland from joining.The free world now had four major trading areas, the Six, the Eight, the Commonwealth and the United States trading area. These large trading units had developed in response to the technological revolution. For example, a few decades ago printing two or three thousand copies of a book might be profitable, but now in the United Kingdom a minimum of twenty thousand copies had to be produced if costs were to be covered. Similarly, in the automobile industry the greatest expenses now were not in the actual manufacturing but in the tooling. Modern production demanded large sales areas and large amounts of capital. This larger base had created the necessity for larger trading areas.The industrial side of this international cooperation was much easier to organize than the agricultural side. The agricultural aspect of the Six was very much “en principe.” One reason why France had joined was that she had a surplus of farm products and hoped to sell inside the Six. German agriculture was strong, however, and in an election year Adenauer was unlikely to agree to settle the agricultural arrangements under the Six. In addition, German industrialists were concerned about the possibility that, if Europe became agriculturally self-sufficient, the volume of their industrial exports might shrink. Probably the negotiations would produce some form of compromise.The government of the United Kingdom had held many discussions with representatives of the Six. Any arrangement that might be reached between them, however, would have to take full account of three major factors. First, the U.K. would not enter any agreement with the Six except after detailed discussion with the Commonwealth, having full regard to the broad terms of the Ottawa Agreements. Second, any such agreement must carry the Eight, including the political neutrals (Sweden, Switzerland and Austria). Obviously, therefore, adjustments would be involved. Third, any such agreement must fully recognize the problem of British agriculture.The negotiations with the Six were likely to continue for some time, but they were not inherently difficult. The Six had adopted various main principles as the basis of their common market, but there had been many derogations from these main principles as applied to individual member-countries.The U.K. would be able to reach agreement on the economic side with the Six, but on the political side the real question was whether France wanted the U.K. to join the Six. In present circumstances, the French appeared to be delaying. He believed that one of the principal reasons for President de Gaulle’s reluctance to press forward with negotiations was the latter’s view that the Anglo-Saxons had “run the show” for too long. Since de Gaulle had assumed the leadership in France, that country had become vastly more powerful and stable. The General recollected vividly the fact that Churchill and Roosevelt had treated him as the head of a refugee government, which had been the fact, but he resented it. Hence he was critical of almost any action the U.K.government might take. He wanted little part in the U.N. He had asserted that the military arrangements under N.A.T.O. were ridiculous and he had withdrawn the French navy from the N.A.T.O. forces. N.A.T.O. had achieved important successes. After the fall of Czechoslovakia, it had appeared to many that Western Europe might be lost to the Communists, and it had been N.A.T.O. above all that had stemmed this tide. At this time, however, the alliance needed remodelling, not merely in a strictly military sense, but above all in spirit. It should be recreated for a new role, the organization of the Free World in the next phase of the struggle with Communism. This struggle might last for many years, principally in the form of competition in the fields of material wealth and spiritual strength, but possibly with occasional military probings. Trade, credit and standard of living were therefore questions of critical importance for the future, and on the spiritual side the same was true of the broad common principles of the West, notably liberty and Christian faith. Unless N.A.T.O. was remodelled along these lines, it would begin to wither.3. Mr. Diefenbaker thanked Mr. Macmillan for his statement, and said he believed that the meeting between Mr. Macmillan and President Kennedy had been most beneficial. He was glad that attention was being focussed on the urgent need to strengthen the free world economically and in terms of unity. On tariffs, spokesmen for the U.S. were in favour of an expansion of trade, but in practice U.S. imports from Canada were chiefly raw materials. This had apparently not altered under the new U.S. administration. He hoped that Mr. Macmillan would achieve his objective of producing great international changes of the kind he had mentioned, and “in a hurry.”

R.B. BRYCE

556. DEA/50412-40

Memorandum from Special Assistant to Secretary of State for External Affairs to Under-Secretary of State for External Affairs

SECRET [Ottawa], April 26, 1961

Visit of Macmillan

It may be useful to record some delayed random impressions of Mr. Macmillan’s visit as a supplement to the Minutes of his meetings with Mr. Diefenbaker.

The outstanding impression which I gained from hearing Mr. Macmillan speak to Mr. Diefenbaker and from comments made by de Zulueta, Mr. Macmillan’s private secretary, was that President Kennedy and his leading advisers had made a favourable impression on Mr. Macmillan. Running through Macmillan’s remarks was a thread of almost surprised gratification at the degree to which the outlook of Kennedy and his advisers approximated that of the United Kingdom Government. Such remarks were often coupled with rueful recollections of policy disagreements with members of the Eisenhower Administration. The principal illustrations of what Mr. Macmillan took to be a new approach on the part of the United States were China, Laos and United Kingdom relations with Europe.

Mr. Macmillan continually referred to the practical difficulties faced by the President, particularly in Asian questions. Mr. Macmillan made it clear that it would be a cardinal principle of United Kingdom policy in the coming months to do everything possible to avoid creating difficulties for the United States in Asian affairs. At one point Mr. Macmillan said that the United Kingdom Government must not “crow” over the attraction which its previous policies had apparently had for the new Administration in Washington.

De Zulueta told me that Mr. Macmillan had two fairly long private talks with President Kennedy and that these had established a “reasonably good relationship.” According to de Zulueta, Kennedy was particularly cautious in discussion. He asked frequent questions not only of Mr. Macmillan but of his various advisers. It had been extremely difficult to tell what Kennedy thought on questions into which he did not himself enter. I gathered that he had come out strongly on China and Laos. On the United Kingdom’s relations with Europe, he had been much less talkative, although he had said that he favoured the United Kingdom’s move toward Europe. De Zulueta thought that the United States side, while they were conscious of the difficulties facing the United Kingdom in negotiating a deal with the EEC, had not really taken aboard the reality or the complexity of the problem of Commonwealth preferences. They had not seemed to realize that for the United Kingdom something very complicated in the way of a special relationship with the EEC would be necessary.

De Zulueta said that Mr. Macmillan had derived the impression that the present Administration in Washington was a good deal less pro-German than its predecessor and thus more conscious of the possibility of the Federal Republic becoming dominant in Europe after de Gaulle had passed from the scene. De Zulueta thought that the principal motive for the vigour of American support for United Kingdom entry into Europe was the desire to have the United Kingdom fully engaged in European affairs and available with its influences and, as Mr. Macmillan put it, its reliability to act as a stabilizing factor vis-à-vis Germany and France. On one or two occasions during the discussions with Mr. Diefenbaker, Mr. Macmillan revealed traces of apprehension about the possible role of Mr. Strauss as a potential successor to Chancellor Adenauer. At another time he reported President de Gaulle’s remarks, which de Gaulle had also made to Mr. Diefenbaker in 1958, thattemperamentally France did not respond well to sustained periods of strong government. De Gaulle clearly thought that when he relinquished power he would be succeeded by comparatively weak régimes.

H.B. ROBINSON

Section B

South Africa

Sub-section I

Effect of South Africa’s Withdrawal from the Commonwealth

557. DEA/11827-40

Memorandum

CONFIDENTIAL [Ottawa], April 5, 1961

Consequences of South Africa’s Withdrawal from the CommonwealthFootnote53

A number of practical questions of varying importance and urgency are raised by South Africa’s decision to withdraw from the Commonwealth on May 31, 1961. This memorandum attempts to identify these issues and to review briefly the relevant considerations, bearing in mind that we have limited information at present on the views of either South Africa or of other Commonwealth countries as to relations between them after May 31. We do know that the United Kingdom Government consider there is no problem about South Africa’s remaining in the sterling area since that area already contains some foreign countries. The United Kingdom Government has also introduced a standstill bill to maintain the existing legislation for a specified, limited period immediately following May 31, in order to allow the British authorities time to work out all the details of the future relationships of the United Kingdom with South Africa.

Broadly speaking, three main approaches to our future relations with South Africa suggest themselves:

The Irish SolutionWhen the Republic of Ireland was proclaimed in 1949, the last ties with the Commonwealth were cut, but, by legislation in the United Kingdom and the Dominions, Irish citizens were not to be classified as aliens. Furthermore, Ireland was to continue to enjoy Imperial trade preferences. In Canada a statute of 1950 (14 George VI, Chapter 29) amending the Canadian Citizenship Act, excluded citizens of the Republic of Ireland from the category of alien or foreign.Particularly for the United Kingdom, but also for other Commonwealth countries, there were special reasons, both positive and negative, for adopting this policy. These included trade, geographical proximity and the large Irish element in the United Kingdom population. The Dominions too were, no doubt, conscious of their populations of Irish extraction. Moreover, there was no issue between Ireland and the other Commonwealth countries comparable in importance and complexity to the racial issue which now divides South Africa from the rest of the Commonwealth. Therefore, the Irish solution seems, as a whole, less applicable to the present situation. This appears to be the conclusion reached by both the United Kingdom and the New Zealand authorities. If the Irish precedent were followed, the Canadian Government might be open to criticism from the Afro-Asian countries and from some groups within Canada that we were making a mockery of the South African withdrawal by allowing South Africa, after its withdrawal, all the practical benefits it enjoyed as a member;

A second possible solution is one examined by United Kingdom officials, namely a “special relationship” with a friendly foreign power such as existed between the United Kingdom and Jordan and between the United Kingdom and Libya. This solution appears to have little, if any, applicability to the present situation as between Canada and South Africa;

A third solution, and the one probably most appropriate in the present situation, would comprise a series of ad hoc decisions applicable to a friendly foreign country whose relations with Canada are bound to be governed from now on by the existence of the acute Canadian-South African difference over the racial issue. It would be difficult in these circumstances to give any kind of preferred treatment to South Africa.

Specific Aspects of the Situation

TradeCanada’s exports to South Africa in 1960 exceeded $52 million and our imports were about $11 million. This tendency towards a large trade balance in Canada’s favour has persisted for many years and can be expected to continue if the basis of trading relations between the two countries is not substantially changed.Our trading relations are based in part on a Trade Agreement embodied in a Statute (23 George V, Chapter 3) dating from 1932; it would not necessarily be affected by South Africa’s withdrawal from the Commonwealth. Moreover, GATT rules present no problem for the continuation of the preferences we exchange under this Agreement. Positive action by one party or the other would be required to terminate this Agreement. In 1960 about $20 million of our exports and over $6 million of our imports were governed by the 1932 Agreement.Apart from the binding of rates of duties and margins of preference for some specific products listed in the schedules of the Trade Agreement, both countries have exchanged Most-Favoured-Nation tariff treatment since 1935 on all other goods. In addition Canada has for many years extended to South Africa, without contractual obligation, the benefit of British Preferential Tariff rates under Section 3(2) of the Customs Tariff, wherein they are listed as a “British country.” This tariff treatment is not reciprocated by South Africa. Canada could legally withdraw this privilege by an Order-in-Council under Section 4(1)(b) of the Customs Tariff.From the foregoing it would appear that:

In the absence of specific action by either country, the existing trade arrangements, including the granting of non-contractual preferences, would continue after May 31 if both the Canadian and the South African Governments would be prepared to have South Africa continue to be regarded as a “British country” within the non-political meaning of the Customs Tariff. If it were decided as a matter of Government policy to allow the existing arrangements simply to continue, it would presumably be desirable to consult the South African Government to confirm the understanding, and for an appropriate statement to be made in the House. If either South Africa or Canada objects to having South Africa described as a “British country” in our Customs Tariff, but it is nevertheless desired to continue the existing arrangements, steps could be taken to amend Section 3(2), for example, by introducing some alternative wording to replace “British country.”

To terminate or to alter the present preferential arrangements would require positive action in the form of either or both of the following:

Either country terminating the Trade Agreement on giving six months notice.

Canada withdrawing the non-contractual part of the British Preferential Tariff from South Africa by Order-in-Council.

While it is open to Canada to withdraw only the non-contractual preferences leaving the Agreement preferences intact, there would be no assurance that South Africa would not then itself terminate the 1932 Agreement or take other retaliatory steps to limit Canada’s access to that important market.

Whatever happens about the preferences, Canada and South Africa would continue as members of the GATT to accord each other ordinary Most-Favoured-Nation tariff treatment.

ConsultationIt is reasonable to assume that South Africa will in due course resign from the various Commonwealth consultative bodies, whether governmental, parliamentary or unofficial. This withdrawal would include meetings of Commonwealth delegations at the United Nations. It would seem unnecessary for Canada to take any overt steps to hasten the ejection of South Africa from any of these organizations, at least until Pretoria had been given a reasonable period of time to withdraw voluntarily.

Diplomatic RepresentationNo decision is called for on this score at the present time. We assume that our two countries will continue to exchange diplomatic missions. A change of nomenclature from High Commission to Embassy need present no difficulty.

Export of Military EquipmentTechnically, the withdrawal of South Africa does not affect its status as a destination for the export of military equipment from Canada. In this field there are no longer any “preferred categories” (apart from NATO). As South Africa is a sensitive area, all applications for the purchase of military equipment are subject to approval. In future, decisions on these applications could be governed by the best judgments available on whether any particular items were likely to be used aggressively or in police operations, that is, whether they could be considered as affecting race relations. The most difficult problem in this area might be that of spare parts for F-86s originally purchased from Canada and for which Canada is about the only remaining source of spare parts. In view of the foregoing considerations, it would seem that no new policy decision is required now in this area of our relations with South Africa, but that each case will be considered on its merits.

Safeguards on Nuclear MaterialsSouth Africa’s departure from the Commonwealth has no direct bearing on its policy regarding the maintenance of safeguards on exports of uranium or other nuclear materials. It is possible, nevertheless, that a growing sense of isolation and frustration may make South Africa less willing to cooperate with other Western suppliers and more eager to grasp any business opportunity which may arise. It is not unlikely that South Africa will have an export surplus in the future and this could – in the present condition of the world market for uranium – create unwelcome competition for Canadian producers, particularly if South Africa were to abandon its present by-no-means enthusiastic support for safeguards.Another possibility is that South Africa might now become interested in feasible ways of developing atomic weapons. Moreover, the presence of uranium in the Union might suggest to other African countries the possibility of such a development and lead them to seek counteraction.In these circumstances, it would be in our best interest to continue, if possible, our close cooperation with South Africa in the International Atomic Energy Agency and elsewhere. We should also encourage them to continue not to sell uranium without adequate safeguards.

DefenceThere is no specific defence agreement between Canada and South Africa and no South African military personnel are visiting Canada at present. One relatively minor problem arises from the fact that the Union is specifically covered by the 1932-33 Visiting Forces (British Commonwealth) Act in which the definition of a “Visiting Force” specifically includes the Union of South Africa. At some future date it will be necessary to amend the Act by excluding South Africa from the list. There appears to be no reason for doing this now since cases of South African “Visiting Forces” have not arisen and are not likely to arise. At present, because of the date of the Act, only the United Kingdom, Australia, New Zealand and South Africa are specifically listed. A general amendment of the Act to bring it up to date with the present membership of the Commonwealth might be considered and at that time South Africa could simply be dropped from the list of Visiting Forces.South Africa will presumably withdraw from the Commonwealth Advisory Committee on Defence Science, which is the only body of its kind in which both Canada and South Africa have membership. Ghana, Malaya and Nigeria are also members.

CommunicationsConsultations in this field are taking place with the Department of Transport, but at first glance there do not seem to be any significant problems requiring immediate consideration and solution. The Commonwealth Air Transport Council has been dormant and South Africa’s withdrawal from it will have no practical effect. The Commonwealth cable has not yet reached anywhere near South Africa and, in any case, the plans for it are sufficiently flexible to allow for its completion without South African participation, although the costs and the economics of operation would, of course, be affected.South Africa has taken no part in discussions on Commonwealth cooperation in space research.South Africa, in common with all Commonwealth countries and Ireland and Burma, enjoys preferential cable rates on both press and ordinary telegrams. In 1945-46 the United Kingdom on behalf of the Commonwealth offered these special rates to any foreign nation which would reciprocate and pay in dollars but only the USA and the Netherlands accepted and at slightly less favourable rates (5¢ rather than 2¢ per word on press cables). In view of the participation of non-Commonwealth countries, there would seem no reason why South Africa should not continue to enjoy these rates provided they were prepared to continue reciprocating. In addition, under a Commonwealth agreement of 1948, certain Commonwealth countries, including South Africa, participate in a wayleave system under which there is a pooling of expenses and revenues from cable and telephone messages between Commonwealth countries. This agreement does not provide for the expulsion of a member but does provide that a party to the agreement may withdraw voluntarily after two years’ notice. To date South Africa has given no indication that it intends to withdraw.There is no formal agreement with South Africa covering postal rates and we have applied the domestic tariff, rather than the higher normal tariff, to South Africa as a courtesy (as we do in the case of other Commonwealth countries, France, and the ex-Commonwealth countries of Ireland and Egypt). Consideration will have to be given to the question of whether the domestic tariff should continue to apply.As a general principle, it would, nevertheless, be advisable for us to do what we can to avoid disrupting any practical existing machinery or arrangements which contribute to more effective communications.

Commonwealth Scholarship and Fellowship ProgrammeWe must assume that South Africa will cease to participate in the Commonwealth Scholarship and Fellowship Programme which was conceived as an aid to members of the Commonwealth exclusively. While, at a later stage, we might want to consider with South Africa a bilateral project along similar lines, the immediate problem is what to do with candidates about to be elected to bursaries in either South Africa or in Canada.This problem may solve itself as a result of informal discussions which have recently been taking place at the Commonwealth Education Liaison Committee. We understand that the South African representative on that body has already been discussing the question of South Africa’s resigning from the Committee.A further pointer in this direction is a report in The Times of March 24 from its Pretoria correspondent to the effect that applications for Commonwealth bursaries under the Scholarship and Fellowship plan have been suspended while the Department of Education goes into the question in view of South Africa’s ceasing to be a member of the Commonwealth.We suggest, therefore, that a decision be taken to suspend any action on appointments here, leaving open the possibility of a bilateral arrangement which would depend on the views of both countries.

CitizenshipSection 23(1) of the Canadian Citizenship Act provides that every person who, under an enactment of a country listed in the First Schedule, is a citizen of that country, has in Canada the status of a British subject, and South Africa is included among the countries listed in the schedule. In addition, as a result of an interpretation of the law by the Citizenship Branch, it has been the practice to accord British subject status to persons who are regarded as British subjects by other Commonwealth countries and more especially by the United Kingdom. It would appear, therefore, that, until such time as South Africa were removed from the First Schedule of our Act, South African citizens would continue to be British subjects under Canadian law and that, even if South Africa were to be removed from the schedule, South Africans would continue to be regarded in Canada as British subjects for citizenship purposes as long as they were accorded that status under British law. It is to be noted, however, that this derivative status depends for its validity upon interpretation and practice adopted by the Citizenship Branch and might therefore be subject to challenge in the courts; subject to this proviso, however, it would seem to follow that provided the United Kingdom enacted standstill legislation, now before Parliament, there would be no need for Canada to take any immediate action to remove South Africa from the First Schedule to the Citizenship Act, since in any case, South African citizens would continue to be regarded as British subjects in Canada until March 31, 1962. Amendment of the Citizenship Act might, therefore, reasonably be left until the next session of Parliament.

ImmigrationAt present South Africans are included among the preferred classes of immigrants to Canada under Immigration Regulation 20(a), along with citizens of other old Commonwealth countries, France, Ireland and the United States. Hence, even though in fact very few South Africans have emigrated to Canada there exists the possibility that large numbers of black and coloured South Africans might seek to come to this country and would be free to do so on equal terms with citizens of the United Kingdom, for example. The withdrawal of South Africa from the Commonwealth would provide an opportunity of avoiding this liability, if it were desired to do so, without the necessity of amending any legislation since all that would be required would be a simple amendment of the relevant Immigration Regulations by Order-in-Council. The effect of such a change would be to place those South Africans who continued to enjoy British subject status in exactly the same category as British subjects from most other Commonwealth countries (e.g. Nigeria and Malaya) and for practical purposes (subject to minor exceptions) on the same footing as all British subjects (including West Indians, Indians and persons of United Kingdom, Australian or New Zealand extraction of the first generation to be born outside those countries) other than those born or naturalized in the United Kingdom, Australia or New Zealand. At the same time such a change would not interfere with the ready admission as immigrants of United Kingdom citizens in South Africa who might wish to emigrate to Canada provided they or their fathers had been born in the United Kingdom. While it may not be necessary to amend the Immigration Regulations immediately, in due course changes will be required and might be expected to take a form which would “normalize” the position of South Africans as citizens of a country not forming part of the Commonwealth and might also improve our position in relation to newer Commonwealth countries interested in promoting emigration to Canada. Such countries have been able to maintain that we have in our immigration policy discriminated against them as compared with South Africa which also has a preponderantly coloured population; to the extent that this would no longer be true it would become that much easier to explain or defend our selective immigration rules and procedures which traditionally and on the basis of general reciprocity have given preferred treatment to citizens of the United Kingdom, Australia and New Zealand as well as to citizens of countries of Western Europe and of the United States from which we have been long accustomed to draw the bulk of our immigrants.

558. DEA/11827-40

High Commissioner in South Africa to Under-Secretary of State for External Affairs

LETTER NO. 167 Cape Town, April 11, 1961CONFIDENTIAL

Effects of South Africa’s Withdrawal from the Commonwealth

It is now in the cards that on 31 May 1961 the Union of South Africa will become a republic and will leave the Commonwealth. For the Nationalist Afrikaners the event will be one for jubilation but they will celebrate alone, shunned by their white political opponents for whom the day will be just another holiday, and ignored by the country’s non-whites apart from those who will exult at having driven the Nationalists into isolation and may mark the days that follow by strikes and demonstrations. Yet all South Africans will share the consequences of Dr. Verwoerd’s action in London in withdrawing his country’s application for continued Commonwealth membership.

It is too early to assess with any certainty the long term effects of the withdrawal from the Commonwealth on the future of South Africa. Politically, withdrawal may appear to have advantages which in the short run only the Nationalists will see because they regard it as signifying the attainment of complete independence, while in the long run the opponents of the Nationalists may be looking back on departure from the Commonwealth as the beginning of the end of Nationalist rule. Economically, the first impact may not make much difference because before the Conference there was no immediate prospect of an end to the deceleration in the rate of economic growth in South Africa. But the longer range effects of increasing economic isolation in a more openly hostile world may slowly and remorselessly erode the prosperity of the country.

So many imponderables are involved that the future course of the republic of South Africa is extremely difficult to chart with certainty. The occasion demands, however, that we attempt to estimate the political and economic effects of the withdrawal from the Commonwealth.Political Effects

The supporters of the inflexible Prime Minister Verwoerd – the extremist Afrikaners who dominate the Nationalist Government – have adopted the posture that the loss of Commonwealth membership will change nothing of value and that the whites of the country will rally behind them in the fight for self-preservation. It is true that the immediate effects of the withdrawal on the parliamentary political situation are almost certain to be negligible. The voting strength of the Nationalists has not been impaired and the unity of their party is such that, if a general election were held in 1961, they would probably increase their parliamentary majority rather than have it diminished. Before the Commonwealth Conference, Dr. Verwoerd had taken measures against dissident members of his party, such as those of the SABRA group at Stellenbosch University and in the Dutch Reformed Churches, and there were indications that he would reduce the influence of the moderate Cape Nationalists. It is expected that the purification of the Nationalist Party will continue, thus reducing the likelihood of an effective challenge to Dr. Verwoerd’s leadership from within his own Party and therefore increasing his domination of the Party. For thinking Nationalists, the only hope is that even Dr. Verwoerd’s own supporters will eventually recognize his inflexibility as a form of political insanity and get rid of him.

While some of the white opponents of the Nationalists appear to share their belief that in the face of world hostility South Africa must withdraw into laager, dismay still predominates amongst thinking Afrikaner moderates and opposition supporters generally. But dismay has been accompanied by anger at the Government and by the growing realization that the policy of apartheid is universally condemned. The Leader of the United Party, Sir de Villiers Graaff, has come forward with proposals for the political advancement of the non-whites in the country which in his view would set the stage for the return of the country to membership in the Commonwealth. He has asked for the support of thinking Nationalists as well as opposition supporters to come together with him in order to form a common front against Dr. Verwoerd and his Government. Although there are signs that Party differences may be blurred in order that a common front may be achieved, it is too early to say whether the Graaff proposals will appeal to the majority of the white electorate. Indeed, judging from past experience, we would say that the majority of white South Africans have no appetite for policies which inevitably would reduce their domination of the non-white groups. But a more effective obstacle to the Graaff appeal for a common front is that the enthusiasm of most Afrikaners for the republic which has led to the withdrawal from the Commonwealth, has angered most English-speaking South Africans and the minority of Afrikaners who are in opposition, with the result that enmity between the Nationalists and other whites has been sharpened. One of the main obstacles to cooperation between the white racial groups in South Africa may have been removed by the achievement of the republican goal by the Nationalists, but the loss of Commonwealth membership has now divided the whites as much as any factor in South Africa’s unhappy history. If it were not for the colour question – i.e. if South Africa were a “white” country – differences such as those which have been caused to secession from the Commonwealth would perhaps lead eventually to civil war. The common white fear of the non-white majority makes it unthinkable that a civil war amongst the whites will take place.

If it is correct to assume that secession from the Commonwealth has occurred at a time when Dr. Verwoerd’s position within his own Party is stronger than ever before and also to assume that fear of the non-whites will not only militate against the success of the Graaff appeal as well as make extremely unlikely a civil war between the two white groups, it does not necessarily follow that South Africa’s future will be peaceful. We would not want categorically to rule out the possibility that the concern of those whites who favour flexibility may in the long run be of more importance to the future of the country than the granite-like inflexibility of the Nationalist Government. It would be unsafe, however, to make these assumptions, and to attempt to answer the question as to whether or not the change will be peaceful in South Africa without taking into consideration the most important factor in contemporary South Africa – the attitude of the non-whites. Even allowing for the limited political consciousness of the non-whites as a whole, it may be said that there are as many Indians, Coloureds and Africans in the country who give thought to political matters as there are politically conscious whites. Most of the politically conscious non-whites in South Africa hoped that the Commonwealth would reject South Africa and they have given the South African United Front credit for what took place in London. The knowledge that they are not alone in their abhorrence of the Nationalist Government has enormously encouraged non-white political movements. Amongst whites as a whole it is expected that non-white political activity and demands will be stimulated and that the important factor in South Africa’s future will become on the one hand the rigid determination of the Government and its supporters to maintain white supremacy, and on the other hand, the growing strength and effectiveness of non-white opposition to the Government’s racial policies. The ban on the African National Congress and the Pan African Congress and the detention or exile under various laws of leading African political leaders serves at the present time to make it difficult to estimate the present strength of the two African political movements. A new element, however, is the formation of the convention movement amongst the Cape Coloureds which has decided upon a militant anti-apartheid campaign beginning with strikes and has also determined to work with the African politicians. Even if demonstrations fail at the time of Republic Day, the continuation of the policy of apartheid will serve to maintain the conditions for non-white opposition to the Nationalist Government and will inevitably spark off violence between the Government and the non-whites. Without direct assistance from black African states or other states which are interested in promoting the fall of the Nationalists, non-whites in the Union would probably not be able to muster sufficient force to bring the Government to its knees. There is at the present time no common frontier between the Union and an independent African state and the possibilities for the supply of dissident forces within South Africa are extremely limited. The picture would change, however, if Angola or Mozambique ended their association with Portugal or if the Federation of Rhodesia and Nyasaland either dissolved or became a black-dominated entity.

In the international field the effect of South Africa’s withdrawal from the Commonwealth, as seen from here, may be to hasten the determination of the Afrikaner Nationalists to withdraw from the world until it comes to its senses. Dr. Verwoerd’s decision, it is believed by many of his opponents, may be the prelude to the Union’s withdrawal or expulsion from the United Nations. Closer to home relations with neighbouring states in Africa will become more difficult. There will be less likelihood than ever that Southern Rhodesia will contemplate joining the Union in spite of Dr. Verwoerd’s pretentions to be the leader of the white man in Africa. The drive for political advancement and ultimate independence in Basutoland, Bechuanaland and Swaziland will be greatly strengthened now that it has become virtually impossible for the United Kingdom to hand over the three High Commission territories to South Africa. The Union’s grasp on South West Africa is regarded as having been shaken. It is believed further that the United States will no longer have to pursue an ambivalent policy in the continent and will prosecute a policy of friendship and massive assistance for the black African states to the eventual detriment of the Union Government.Economic Effects

Members of the South African Government have suggested that, while the economy may suffer a little initial discomfort as a result of withdrawal from the Commonwealth, the longer view is quite reassuring and the departure from the Commonwealth need make little difference one way or the other. There are so many imponderables to consider in judging whether or not South Africa’s economic prospects will have been harmed by the loss of Commonwealth membership itself, that the precise moment of doom cannot be predicted with any accuracy. However, while the rate of growth of the South African economy may or may not yet have been affected by secession from the Commonwealth, it appears to us fatuous to expect that this event will not ultimately have a harmful effect on the economy.

There has been little confidence in the South African economy since Mr. Macmillan’s “Wind of Change” speech in Cape Town in January 1960 and the events which followed. Highly dependent on overseas investment, South Africa has seen a dramatic outflow of capital in the last year which has cut the pace of economic development considerably. For South Africa the benefits of Commonwealth membership were reflected mostly in the financial and trading relationship with the United Kingdom which supplied most of South Africa’s capital funds, took one third of her exports and marketed most of her gold. Comfort is being found in statements by the Union Government that trading and financial arrangements with the United Kingdom will continue. There are doubts, however, that South Africa can expect to be given preference over Commonwealth borrowers by the Bank of England and that such agreements as the Commonwealth Sugar Agreement will long continue to apply to the Union. It is also doubted whether preferential trade agreements with Commonwealth countries will in the long run be maintained. The significance of the loss of Commonwealth membership on the economy will undoubtedly be seen better in a year or two than can be seen today. The event itself will, however, not increase confidence in the Union amongst foreign investors and less money will now come in to South Africa for the development of new mines and industries.Effects on Canadian-South African Relations

De. Verwoerd and Mr. Eric Louw have made it quite clear to South Africans that in their view the Prime Minister of Canada supplied the push which led to the South African withdrawal from the Commonwealth. In the minds of Afrikaner Nationalists and many other South Africans, Canada is now associated with the enmity of the African and Asian world towards this country. This circumstance may have a markedly adverse effect on our trade with South Africa in the near future (wheat, for example). It will have no effect, however, on our political standing with the South African Government because there was little evidence even before the Prime Ministers’ Conference that we had any influence over South African external policies, except indirectly and on rather academic international questions.

As long as a government devoted to the principle of white supremacy is in charge in South Africa, we should not expect an improvement in relations between South Africa and Canada. Comfort may be derived, however, from the fact that the non-white political movement and those whites, mainly in the Liberal and Progressive Parties, who are opposed to apartheid, have applauded the attitude taken by Canada. If the eventual fall of the Nationalist Government can be assumed, Canada’s influence on the external policy of this country should then be far greater than it has ever been in the past.Conclusion

In this discussion of the effects of the withdrawal of South Africa from the Commonwealth, we have suggested that Dr. Verwoerd’s action will contribute to the eventual collapse of his Government and the policy of white supremacy. We have attached less importance to the possibility of a change of heart amongst white South Africans than to the inevitability of a collision between the white supremacists fighting alone and the black nationalists encouraged and succoured from abroad. It may be that we have drawn the picture too starkly and that, despite Dr. Verwoerd’s latest pronouncement, the lines should be softened. Time and the influence of the imponderables may work for a peaceful solution in South Africa but at this stage we are not optimistic that a dramatic change for the better will take place.

International pressure on South Africa has increased tremendously in the four weeks which have passed since the Prime Ministers’ Conference and the events in London have merged with others in the pattern of international hostility towards the policy of apartheid and the Government which is so rigidly dedicated to its implementation. We believe, however, that the decision of Dr. Verwoerd to withdraw his country’s application for continued membership will in time be regarded as a turning point in South African history at least as significant as Sharpeville.

JAMES J. HURLEY

559. DEA/11827-40

Secretary of State for Commonwealth Relations of United Kingdom to Secretary of State for External Affairs

CONFIDENTIAL London, May 9, 1961

My dear Green,I should like to give you some account of our present thinking about our future relations with South Africa. Each member of the Commonwealth will of course be determining its own relations in the light of its own circumstances and interests. I feel nevertheless that each in determining its own policy would find it helpful to know the general principles on which others are proceeding.

I have stated in Parliament the broad considerations governing our own approach to our future relations with South Africa. As I said, on the one hand “we must be careful not to destroy the value of Commonwealth membership by giving to those who are not members all the privileges of those who are.” On the other; “we have no desire to destroy needlessly links which are of mutual benefit to both our peoples.” I said also that while some of the issues involved are reasonably straightforward, others present quite difficult human and political problems which will require a good deal of careful thought, and will involve discussion with the South African Government, and in some cases Colonial Governments.

Certain changes will of course take place as soon as South Africa becomes a Republic and leaves the Commonwealth on 31st May, 1961. With effect from that date:

South Africa will presumably withdraw from all Commonwealth consultative and technical bodies and will no longer attend Commonwealth conferences and meetings (for instance, meetings of Commonwealth delegations in New York).

We shall ourselves cease to extend to the South African Government the special processes for consultation and exchanges of view which apply to our relations with Commonwealth Governments.

Our High Commissioner in South Africa will in his diplomatic capacity – he is also and will for the time being continue to be styled High Commissioner for Basutoland, Bechuanaland and Swaziland – be styled Ambassador.

Pending examination of the question, the Commonwealth Secretary will continue to be responsible for the conduct of relations between Britain and South Africa.

As regards matters requiring legislation, we have introduced a “holding” Bill – the South Africa (Temporary Provisions) Bill – to preserve for a maximum period of twelve months from 31st May such existing United Kingdom and Colonial laws as would otherwise cease to have effect in relation to South Africa after 31st May. These are laws worded in such a way that they apply only to countries which form part of Her Majesty’s dominions or, in other cases, to members of the Commonwealth. Some of them (for example, the Merchant Shipping Act, under which South African ships are classed as British ships and South African certificates of competency issued to masters are recognised as valid) are of considerable intricacy and practical importance, and we could not simply let them lapse, leaving a vacuum.

There are besides certain United Kingdom laws which, because they refer to South Africa by name, and are not worded in the way referred to in the preceding paragraph, will not automatically lapse in respect of the Union at the end of May. These will be left unchanged while we complete our survey. The most important of these is the British Nationality Act, 1948. Thus, South African citizens will remain British subjects under our law for the time being. But, as I have said in Parliament, “it is not of course our intention to leave unaltered the rights in respect of British nationality now enjoyed by South African citizens. But this is a matter which required most careful thought.”

It is our aim in due course to enact comprehensive permanent legislation to give effect to the eventual decisions in regard to the amendment of laws of the type referred to in the last two paragraphs, and to any other matter which may appear to require legal provision.

There are of course other very important non-legal matters on which we have to decide what our own policy should be. They are the subject of agreements and conventions which are not automatically affected by South Africa’s withdrawal from the Commonwealth. These include our defence and trade agreements with South Africa, and the relationship between South Africa and the High Commission Territories. In regard to the latter, we have to be careful not to make any general decisions which might indirectly damage the interests of the peoples of those Territories. We are reviewing these matters so as to determine what would be the right course in the light of the general considerations to which I have referred in paragraph 2 above.

We have appointed a committee of officials which is preparing a report to Ministers, and we shall examine all the issues as quickly as we can. We do not, however, in general want to take decisions on particular questions falling within the categories mentioned in paragraphs 5, 6 and 8 above until we have been able to survey the whole field of our relations with South Africa. I shall be careful to consult you where it seems that your country is concerned, and to inform you of any decisions which we think may be of interest to you. I should of course be most interested to learn anything you can tell me about your thinking on your Government’s future attitude on these matters.

With kind regardsYours sincerelyDUNCAN SANDYS

560. DEA/11827-40

Memorandum from Under-Secretary of State for External Affairs to Prime Minister

RESTRICTED [Ottawa], May 19, 1961

Citizenship and Immigration Questions Arising as a Result of South African Withdrawal from the Commonwealth

CitizenshipAs a result of South Africa’s withdrawal from the Commonwealth it will be necessary in due course to amend the Canadian Citizenship Act, of which section 23 stipulates that “every person who under an enactment of a country listed in the First Schedule is a citizen of that country has in Canada the status of a British subject,” and section 2 provides that ‘“country of the British Commonwealth” means for the purpose of this Act a country listed in the First Schedule.’ At an appropriate time action will accordingly need to be taken to delete South Africa from the list of countries enumerated in the First Schedule.It is now learned that the standstill legislation introduced in the United Kingdom will not affect the United Kingdom nationality laws but that, as in Canada, South African citizens will continue to be British subjects as long as the United Kingdom statutes are not amended by removing South Africa from the list of enumerated countries. Until this is done South African citizens will remain British subjects under both Canadian and United Kingdom law and will continue to enjoy all privileges which this status confers; it is noteworthy, in this context, that if indeed Canada were to take action before the United Kingdom, South African citizens would continue to be accorded in Canada the status of British subjects by virtue of their being so regarded under the laws of the United Kingdom. There might therefore be advantage in exploring the possibility of arranging for relevant changes in Canadian and United Kingdom law to take effect on the same date.Since there appears to be no immediate need to amend the Canadian Citizenship Act in this respect the Department of Citizenship and Immigration are understood to favour postponing whatever amendments may seem desirable until the next session of Parliament. This would afford opportunity to consider any problems which might arise in the interim but would of course continue South African citizens in the enjoyment of certain privileges under Canadian law which are not extended to aliens.

ImmigrationAt present citizens of South Africa are by regulation included in the preferred classes of immigrants to Canada comprising those who are either British subjects by birth or naturalization in old Commonwealth countries or citizens of Ireland, Metropolitan France and the United States. Unless therefore it were decided to leave South Africans in this preferred category even after they had ceased to be British subjects, the immigration regulations should be amended in due course. There would, however, be no necessity to undertake revision of the immigration regulations by May 31, especially as, for some period after that date, South African citizens as such will continue to have the status of British subjects in Canadian law by the operation of the Canadian Citizenship Act and the United Kingdom nationality laws. Immediate amendment would only be necessary if it were desired to ensure that as soon as South Africa left the Commonwealth South African citizens, even though they were still British subjects, should no longer enjoy the same privileges of admission to Canada as immigrants or non-immigrants as are enjoyed inter alia by citizens of other old Commonwealth countries. It is my understanding that with these considerations in mind the Department of Citizenship and Immigration have in contemplation a more general revision of the immigration regulations as a result of which an adjustment would be made later on without singling out South Africa as the object of the change.It is possible that proceeding in this way might lead to some criticism from non-white Commonwealth countries that we were continuing to accord to South Africa as a foreign country a more favourable position in regard to immigrant entry to Canada than was accorded to them. Such criticism could, however, be countered by explaining that our immigration regulations would be reviewed and revised as soon as there had been adequate opportunity to consider all that would be involved in making such changes as might be required or desirable; if necessary, it could also be pointed out that the temporary continuance of the preference now granted to citizens of South Africa represented no more favourable treatment than was extended to citizens of Ireland, the United States and France, none of which are Commonwealth countries.

N.A. ROBERTSON

561. DEA/11827-40

Secretary of State for Commonwealth Relations of United Kingdom to Secretary of State for External Affairs

PERSONAL AND CONFIDENTIAL London, September 11, 1961

Dear Howard [Green],

In my letter to you in May about our relations with South Africa I promised to inform you of any decisions which might be of interest to you.

Since then we have, in consultation with all the other Commonwealth Governments concerned, tackled such matters as South Africa’s interim position under the Commonwealth Telecommunications Agreement, temporary arrangements for her continued participation in the Commonwealth Area Communications Scheme for Merchant and Naval Shipping and her continuance as a member of the Commonwealth War Graves Commission.

We have since decided, and have so informed the South African Government, that South Africa cannot, as a foreign country, continue to participate in the Commonwealth Sugar Agreement after the end of 1961. You will, no doubt, also have heard that, as I forecast in my previous letter, the South African Government have withdrawn from all the Commonwealth organisations of which they were a member. In addition, we have for our part ceased to include them in the processes of consultation and exchange of information which we follow with fellow members of the Commonwealth. Similarly, South Africa no longer attends meetings of Commonwealth Delegations at the United Nations.

Thus you will see that we have already moved some way in applying the general principles which I described in my previous letter, i.e., neither to destroy the value of Commonwealth membership nor needlessly to rupture mutually beneficial links.

There are, however, many aspects of our relationship – some of great importance to us – which have still to be settled. On all of them we expect to hold discussions with the South Africans in the next few months – although the intervention of the South African election on 18th October will be a complicating factor. Our aim will be to reach agreement with them on all matters in which it is necessary in time to enable us to pass the requisite legislation by 31st May, 1962.

Meanwhile we have made good progress in identifying the problems which we must resolve. They are many, and complex – as is inevitable in view of the intricate pattern of relationship which has been woven over the years between South Africa and this country.

Probably some personal interests will suffer as a result of South Africa’s withdrawal and I fear that we may meet with some protests and cases of hardship, which we shall have to deal with as best we can. But there are some arrangements which in our own national interest we cannot afford to abandon entirely.

For example, if the merchant shipping lifeline across the Commonwealth is to be protected in time of war, we must preserve co-operation between South Africa and this country in the defence of the sea routes round the Cape. The visit of the South African Minister of Defence in July afforded an opportunity to go over this ground with him. We reached the conclusion that it will be possible to make adequate arrangements for meeting our mutual defence requirements in the new constitutional circumstances. We shall not, of course, be committed in the future, any more than we are at present, to giving military support to the South African Government’s domestic policies.

We also want to preserve our export trade to South Africa, both visible and invisible, in the interest not only of the United Kingdom but also of the Sterling Area. Because of this, and because the Trade Agreement is not conditional upon Commonwealth membership, we do not propose to ask for the Trade Agreement to be cancelled or amended as a result of the change in our constitutional relationship, although some modifications may in due course become necessary if we join the Common Market.

Nationality has difficult implications for individuals and the adjustments to be made in this matter have given us much anxious thought. Our High Commissioner will have told you about our proposals in this matter and we shall be considering any comments from your Government.

An important matter for us is the long standing relationship between the High Commission Territories and South Africa, which in all personal and economic affairs is extremely close. We do not think that the constitutional change need make any difference to this relationship, and we hope that the arrangements that we make about our relations with South Africa generally will protect the position of the Territories and access to them which is unavoidably dependent on South Africa.

On the legislative side we shall, in the interests of the welfare of individuals here and in South Africa, hope to arrange, subject to reciprocity, to retain the Colonial Probates Act, which provides for the reciprocal recognition of probates, and the Maintenance Orders (Facilities for Enforcement) Act, under which orders made in this country can be enforced in South Africa and vice versa. We shall also seek to retain the sections of the Companies Act, which deal with the maintenance of company branch registers in Britain and South Africa.

Except for the Acts to which I have referred in the preceding paragraph, we shall probably allow legislation which has applied between South Africa and this country by virtue of South African membership of the Commonwealth to lapse, though Acts which refer to South Africa by name (there are not many of these) will continue to be valid, unless repealed or amended.

One consequence of the new relationship is that we shall be proposing to the South African Government the negotiation of an Extradition Treaty to replace the Fugitive Offenders Act, 1881. In this matter we may need to make some special arrangements as between South Africa and the High Commission Territories.

Some of our postal and telegraph rates to South Africa will have to be revised, since the Commonwealth rate will no longer be appropriate, but we are still considering what new rates to fix. We shall, of course, inform the Commonwealth Telecommunications Board of our proposals in respect of telegraph rates once we have reached a conclusion.

You will appreciate that, if we are to achieve the right balance in our future relations with South Africa, we shall need to proceed most carefully in our discussions with them. I am sure that I can rely on you to treat all the above information with particular confidence.Footnote54

With best wishes,Yours sincerelyDUNCAN [SANDYS]

562. DEA/11827-40

Memorandum from Secretary of State for External Affairs to Prime Minister

CONFIDENTIAL [Ottawa], February 16, 1962

Withdrawal of South Africa from the Commonwealth

Some months ago the Right Honourable Duncan Sandys wrote a personal and confidential letter to me describing in general terms the steps which the British government contemplated taking in order to change the basis of Britain’s relations with South Africa before May 31, 1962 – the date of expiry of the “standstill” legislation which was enacted by the British Parliament a little less than a year ago. A copy of Mr. Sandys’ letter is attached.In my reply of October 8, 1961, to Mr. Sandys† I undertook to send him a review of the steps which we have taken to meet the problems created for Canada by the withdrawal of South Africa from the Commonwealth. Such a review has now been prepared for my signature but because of your earlier interest in this matter and because the letter incorporates the views of several government departments, I thought you would wish to see it before it is sent.Footnote 55

H.C. G[REEN]

[ENCLOSURE]

Secretary of State for External Affairs to Secretary of State for Commonwealth Relations of United Kingdom

PERSONAL AND CONFIDENTIAL. Ottawa, February 14, 1962

You were good enough in September last to review for me the steps which were being taken to resolve problems created for Britain by the withdrawal of South Africa from the Commonwealth. Since that time I understand a British team has held conversations with the South Africans on a number of the outstanding points mentioned in your letter. I know, of course, that you are working to a deadline of May 31, 1962, when your “standstill” period will expire. We, as you know, have been dealing on an ad hoc basis with the specific problems which have arisen for us. Perhaps it would be useful at this time for me to summarize for you our views and the actions we have taken vis-à-vis South Africa.Shortly after the last Commonwealth Prime Ministers’ meeting we began to consider the practical problems which would be created for Canada as a result of South Africa’s then impending withdrawal from Commonwealth membership. We decided that as far as possible the privileges of Commonwealth association should be eliminated from Canada’s relations with the Republic but that in carrying out such a change in relationship Canadian actions should be in no way vindictive. In the months since South Africa’s withdrawal we have sought to apply this formula to the specific problems that have faced us.As you are no doubt aware, Canada enjoys a favourable trade balance with South Africa which we do not wish to upset in the prevailing unsettled circumstances of world trade. A good part of our trade with the Republic is governed by a bilateral trading agreement and we have indicated to the South African Government that it is not our present intention to make any change in the tariff treatment accorded to South African goods. We have continued to grant a preferential tariff to South African goods imported into Canada. South Africa in turn continues to grant Canada bound margins of preference on some fifteen items, some of which are of considerable importance to Canada.While the flow of immigrants from South Africa has not been great, there are in Canada a number of South African citizens who have declared their intention to apply for Canadian citizenship when they become eligible to do so (i.e., five years after their entry to Canada for permanent residence). Under the terms of the Citizenship Act the privileged British subject status of such South African nationals is recognized. In order not to inconvenience this group either before the laws of Canada or in their dealings with their own government by changing their status in Canada, we propose that when next our Citizenship Act is to be amended we will eliminate specific reference to South Africa as a Commonwealth country. At the same time a provision will be introduced into the Act under which the status of nationals of countries which leave the Commonwealth, who are resident in Canada, shall be deemed to be that of British subjects. As yet this amendment has not come before the House. We shall, of course, continue to recognize as British subjects all South Africans who retain that status under the laws of a Commonwealth country as well as nationality acquired by South Africans under the legislation of another Commonwealth country.Very recently considerable changes in the Canadian Immigration regulations were announced. Under these revised regulations, South Africans will be treated as foreign nationals and will be required to obtain immigrant visas for permanent entry to Canada. South Africans will not be required to obtain visas for non-immigrant entry.At the time of the Republic’s withdrawal a number of South African students were enrolled at Canadian universities on two-year scholarships granted under the Commonwealth Scholarship and Fellowship Plan. A further number of South African candidates had just been selected for the academic year 1961-62. We decided that the Plan insofar as it applied to South Africans would be allowed to continue until the end of the 1962-63 academic year. This has meant that the South African students studying in Canada when their country withdrew from the Commonwealth and those who had been selected for scholarships just prior to their country’s withdrawal would be offered the opportunity of completing their academic courses in Canada but that no further applications would be invited from South Africa under the Plan. The South African Government expressed its appreciation for this arrangement and offered reciprocal facilities. At present there are ten South African students at Canadian universities but no Canadian students hold scholarships in South Africa.South Africa’s withdrawal from the Commonwealth has not had a direct bearing on our policy with regard to the export of military equipment to the Republic. Export permit applications covering military equipment to South Africa have been reviewed individually by the Canadian Government for some years, as have applications from all but a very few countries. I think that the criteria we use in judging applications originating with the South African Government are very like your own. We have refused and shall continue to refuse, applications for the export of any arms which could be used for civic control or to enforce the policy of apartheid.We were interested to learn that British postal rates to South and South West Africa are to be increased to foreign rates as from April 1, 1962. We agree with the view of your postal authorities that a pragmatic approach must be taken in this matter in relation to South West Africa but for the present the Canadian Post Office has decided not to make any changes in the postal rates from Canada to South Africa.The South African Government’s decision to withdraw from Commonwealth consultative and semi-technical bodies was timely. I am glad, however, that arrangements have been made for continuing South African participation in the Commonwealth War Graves Commission, the Commonwealth Telecommunications Wayleave Scheme (until the end of the current fiscal year) and the Area Communications Scheme for Merchant and Naval Shipping. In connection with the last named, I understand that you have undertaken to explore in the next three years the question of replacement of the Cape Communications complex. We shall be interested to learn how your study of possible alternatives progresses. I am sorry that the South Africans have been less forthcoming in working out arrangements whereby they could continue to participate in the very useful work of the Commonwealth Agricultural Bureaux.As you know, Canada has two Trade Commissioner’s Offices in South Africa in addition to the Embassy. They are located at Johannesburg and Cape Town. We have been giving consideration to changing the status of these offices to that of Consulates but as yet arrangements to this end have not been completed.During the past few months the Department of Justice has been reviewing Canadian Statutes for specific references to South Africa. Although this study is not yet at an end, it appears that the Acts which will require amendment in due course are:The Canadian Citizenship ActThe Customs Tariff ActThe Diplomatic Immunities (Commonwealth Countries) Act; andThe Visiting Forces (British Commonwealth) Act.I have referred in preceding paragraphs to trade and citizenship matters. I expect that legislation will be brought forward in the near future by the departments of Government concerned for the amendment of the last two of the Acts mentioned. In practice we make no difference between Commonwealth and foreign countries in extending diplomatic privileges. Visits to Canada of South African Forces are so infrequent as to remove all urgency from the task of amending the Visiting Forces (British Commonwealth) Act.South Africa is not specifically mentioned in our Fugitive Offenders Act which provides for the extradition of a person “… accused of having committed an offence to which this Act applies in any part of Her Majesty’s Dominions …”. As this legislation has ceased to apply to South Africa, the Minister of Justice is considering whether to negotiate a bilateral extradition treaty with South Africa or to adopt an easier and equally satisfactory solution through proclamation of the Extradition Act in respect of South Africa. The Canadian Extradition Act, Part II, permits the Governor-in-Council to proclaim the Act in force with respect to any country with which Canada has no Treaty respecting extradition.I am indeed grateful for the trouble you have taken to keep me informed directly and indirectly of the progress you are making in this complicated matter, and I hope that this letter may be of use to you.

[HOWARD C. GREEN]

Section C - India

Sub-section I

Politique Sur L’aide À L’inde Policy on Aid to India

563. DEA/12881-J-2-40

High Commissioner in India to Secretary of State for External Affairs

LETTER NO. 221 New Delhi, March 15, 1961

CONFIDENTIAL

Canadian Capital Assistance to India

Throughout my term as Head of this Mission and, indeed, long before, I have been concerned that the efforts of the Indian Government to develop its economy in a democratic context to meet the expectations of its people should succeed. The far-reaching political significance of either the success or failure of India needs no underlining, and has, I believe, been accepted as axiomatic by all Western governments. From the Canadian point of view the question is whether without undue strain on our resources we can take additional steps which would tend to increase the probability of conspicuous Indian success.

First of all I should say that, as seen from this Mission, Canadian capital assistance has made a very effective contribution to the Indian economy, having regard to the scale of our effort and the requirements of India. To take only two instances, our hydro-electric projects have enabled a substantial measure of industrial expansion in Assam and Madras and our locomotives and other railway equipment have assisted materially in the post-war rehabilitation of India’s transportation system. Moreover, the policy of contributing aid in the form of grants rather than loans or credits has made that aid especially effective since it has not involved a future charge on the Indian economy. Canadians can draw satisfaction from the knowledge that their aid to India has been true aid and that the bulk of grants received by India from sources other than the United States has been provided by Canada.

Since the inception of the Five Year Plans in 1951, and up to December, 1960, Canada’s authorized grants in aid totalling $181,140,000 accounted for 69.3 percent of the total grants from all countries other than the United States, whose massive assistance under T.C.A. programmes and P.L. 480 amounting to $1,015,360,000 contributed the major share of the total from all sources amounting to $1,272,420,000. The United Kingdom has not provided any significant assistance in the form of grants under the Colombo Plan; nor have Germany or the Soviet Union provided substantial aid in the form of grants.

It seems to me to be most desirable to maintain the level of Canadian grants to India under the Colombo Plan at not less than the present level for at least the duration of the Third Five Year Plan. I consider that any increase would be valuable, having regard to the large foreign exchange requirements foreseen by India’s planners in the period 1961-1966.

If the prospect of enlarged aid in the form of grants is slight and, indeed, even if some increase in grants may be contemplated, I should like to propose that reconsideration be given to the policy of refraining from offering loans to India either under the Colombo Plan or as a contribution through the “Aid to India Club.” In particular I have in mind that loans would be appropriate for revenue-producing projects, especially those which directly or indirectly generate savings in Indian foreign exchange expenditures.

Hitherto, Canada’s loans in aid amounting to $31,420,000 have accounted for only 1.4 percent of the loans from countries other than the United States, including the United Kingdom $325,320,000; Soviet Union $766,820,000; West Germany $301,160,000; and Japan $55,220,000. In loans the United States topped all other countries with loans to the value of $1,949,280,000 for a total from all sources of $4,003,140,000. All countries other than Canada have considered it desirable to channel their aid to India in the form of loans rather than straight grants.

The measure of aid used by the Indian Government and public is volume. Loans are accepted as gratefully as grants and are counted as aid in all tabulations. A $50 million loan receives twice as much credit as a $25 million grant. There are a number of reasons for this attitude which, though perhaps obvious, deserve stating. First and foremost, the drive for rapid economic development is genuine and intense. The needs of the moment are vast and a large loan makes a greater impact in the short run than a small grant. Second, the Government is convinced that the economy will expand sufficiently as a result of loans to produce the surplus resources necessary to repay them when due. Third, there is a feeling in some quarters, based on pride and a dislike of being marked as a receiver of charity, that loans are actually preferable to grants on a dollar-for-dollar basis. The Soviet Bloc, especially, have exploited this attitude in their aid programmes. (Naturally, this attitude is not shared by Finance Minister Desai who well recognizes the advantages which grants have over loans).

I am raising the question of loans at this stage because I hope it may be given consideration when the Canadian position with respect to the April meeting in Washington of the Aid to India Club is being decided. I should like also to draw a distinction between loans for projects in the public sector and arrangements which might be made to facilitate expansion in the private sector. The latter is of great importance and is rapidly becoming more important, but in my view the essential core of economic development in this country is being and will continue, at least for the five-year period under consideration, to be achieved mainly by efforts in the public sector.

The pattern of the loans has varied from country to country, but they have usually involved an initial repayment deferred up to five years; a part repayment in semi-annual amounts up to five years, and the balance repaid in annual or semi-annual amounts up to 15 years. Interest rates have varied from 4½% to 6% per annum. (An excellent review is contained in “External Assistance 1960” published by the Economic Department of the Ministry of Finance, copies of which we have forwarded.)

The needs of the moment are so great that donor countries have considerable latitude in selecting the form their aid is to take. It is entirely possible for donor countries to exercise self-interest and yet make as effective a contribution to Indian development as if they were motivated solely by pure idealism. I have little doubt that many countries will choose very carefully from the “shopping list” which will be before the Washington meeting.

Many countries, notably the United States, the United Kingdom, West Germany, Japan, and the Soviet Bloc, apply much of their aid in ways which perhaps through accident but much more probably by design result in their nationals obtaining a permanent interest in important sectors of the Indian economy. For example, Export-Import Bank loans and funds generated by the operations of Public Law 480 are now financing equity participation by United States firms in aluminum, synthetic rubber, fertilizers, tires and other industries. Japan is financing the development of iron ore deposits in return for a claim on a portion of the eventual output of iron ore. The Soviet Bloc are acquiring a significant degree of influence in several fields, notably steel, oil, heavy industrial equipment and machine tools and are seeking to alter permanently India’s traditional patterns of foreign trade. Indeed, the Soviet Union has been sufficiently ingenious as to obtain goods from India (which they would probably have had to purchase in any event) and to arrange for payment in such a way that it counts as aid.

So far as the Western countries are concerned, government policies appear to encourage investment in India by private firms. This investment, while making an immediate and effective contribution to India’s economic development, promotes trade and other commercial relations with the donor country and eventually through remission of dividends, interest, royalties, etc. and/or repatriation of principal generates new income in the donor country.

That portion of Canadian aid (grants under the Colombo Plan) which has been devoted to the purchase of nonferrous metals has, however, to some extent provided materials necessary for the maintenance of plants erected through loans from other countries.

It seems to me that Canada’s policy for aid to India should be reviewed in light of recent changes, and that it should now be made more flexible in order that, first we may open up another means of strengthening the development of the public sector and, second, Canada and Canadian firms may participate more effectively in this new era of industrialization in a form which is midway between aid and trade.

Unofficial conversations with senior officers in the Indian Government reveal an increasing interest on the part of the Indian Government in the possibility of Canada continuing its aid to India in the form of both grants and loans. Mr. Herbert Moran can confirm that during his recent visit to India, this question was raised with him on a number of occasions.

The general thought appeared to be that Colombo Plan aid might be continued in support of purchases of essential industrial materials whose need is becoming urgent with the expansion of plants – and it is to be noted that India has been discussing the possible supplies of such materials under loans – and that some metals are likely to be supplied by the United States under the Development Loan Fund.

As I have mentioned above, however, I hope that at least in respect to industrial projects which in a sense are revenue producers, Canada might consider extending additional aid in the form of loans, presumably along much the same lines as those now employed by other countries.

Should a policy of aid in the form of loans in addition to the existing level of grants commend itself to the Canadian Government, I consider that the methods followed for support of the public and the private sectors should be distinct. For the public sector, long term loans (a minimum of 15 years) appear to be indicated. For the private sector an eminently suitable arrangement would be a Revolving Loan Fund to support the participation of Canadian firms in projects and joint company ventures where at present Canada is represented by only two Canadian firms, Aluminum Limited in the Indian Aluminum Company, and the Massey Ferguson Company in a new tractor venture. This is in contrast to very active interest being manifested by firms in the United Kingdom, the United States, Germany and Japan. Full details on this proposal for a Revolving Loan Fund, and the names of a number of Canadian firms who have applied to the Government for loans to assist in Indian projects or joint company ventures are available from the Deputy Minister of the Department of Trade and Commerce as the result of considerable correspondence between the Commercial Counsellor in New Delhi and the Deputy Minister.

I wish to commend these proposals which would put Canada in a position to participate actively in a new area of development in India in a manner that offers some prospect for continuing trade and industrial relations with Canadian business men. It would have the attraction of providing the prospect of an increase in employment in Canada in engineering industries and other sections where employment is much needed. Moreover it offers the prospect that such loans will be self liquidating over the years, and that there would be a gradual build up of revolving aid funds to India with decreasing demands on the Canadian taxpayer.

Should this scheme, or something like it, be adopted there would appear to be arguments in favour of relating projects for aid funds to existing applications for assistance from Canadian firms. Indeed in any case there is much to be said – since there is a wide choice in the large development plans – for directing Canadian efforts along those channels where there is a prospect of continuing commercial relations when aid may no longer be necessary to sustain India’s development.

To sum up, I hope that our approach to the Aid to India Club in Washington will have a three-fold nature. First, I believe that we should maintain our grants at at least their present level. Second, I trust that a suitable basis for loans for projects in the public sector can be evolved. Third, I commend the scheme for enabling private sources in Canada to join with industrial interests in India in developments in the private sector.

Following for J.L. Gray.Bhabha’s telegram of December 22Footnote 56 which you saw before leaving offered to guarantee that uranium concentrate sold by Canada to India would be used only for making fuel elements for C.I.R. Officials who have now reviewed the situation are agreed that this latest offer does not repeat not alter the position and that Canada should sell uranium concentrate to India only on the basis of our standard safeguards requirements.

Lorne Gray and Dr. Bhabha called on me yesterday to discuss the urgent necessity of using the second lot of 100 fuel rods for CIR. Gray says it is important that these rods be made available for immediate use. Dr. Bhabha has agreed that, if the Indian request (which has now been formally approved) to include the purchase of these rods under Colombo Plan allocations is not repeat not accepted by Canada, India will purchase second lot commercially as in the case of the first lot. May the second lot of rods be released to the Indians on this understanding. If you accept proposal to finance this purchase under Colombo Plan I agree it should be included in next year’s programme.

Gray reports that progress at CIR is very satisfactory and that all Canadians will have departed Trombay in a few weeks. Gray and Bhabha agree that the difficulties encountered in the fuel rod fittings are being overcome. Such experience is not repeat not unusual and CIR has only experienced troubles common to similar establishments elsewhere says Gray.

Mr. Lorne Gray, Dr. Honi Bhabha and Mr. P.N. Thapar, Member for Finance and Administration, Atomic Energy Commission, called to keep me informed about conversations which Gray and Bhabha have had regarding the possibility of Canadian-Indian cooperation in the development of a Candu atomic power reactor in India, probably in the Delhi area. Both Gray and Bhabha are interested in the possibility and Gray may request authorization to spend approximately $50,000 for an investigation to be made by Canadian engineers. The purpose of the investigation would be to determine more specifically the total costs involved so that the feasibility of the proposal may be considered by Canadian authorities.

I understand that Canadian and Indian engineers would work out the specifications for the power plant in India, using the plans of the Canadian project, modified, if necessary, for a Canada type power reactor in India. The idea is that all of the equipment which is produced in Canada would be obtained from Canada. The Indians would purchase whatever equipment is required from sources outside of Canada, such as turbines which are not produced in Canada, and would be responsible for the cost of all construction. Canadian engineers would co-operate with Indian engineers in supervision. At present it is very roughly estimated that the Canadian portion would amount to $25 million. A more exact figure will be determined by the investigation proposed by Gray.

Canadian participation in this project being financed by the Colombo Plan was suggested as a possibility. The preference, however, seemed to be that it would be possible to obtain a long-term loan from Canada for financing Canadian participation and equipment. I said that this would be a matter to be considered by Canadian authorities. Mr. Thapar said that he would take the matter up again with the Indian authorities, whom he has already sounded out. The Economic Department of the Ministry of Finance apparently would prefer a loan rather than the allocation of any further Colombo Plan funds from Canada to India for an atomic project in addition to the hydro-electric projects which have already been undertaken.

Mr. Gray said that before any serious consideration could be given to the project it would be absolutely essential for Canadian and Indian engineers to make a preliminary survey to determine more accurately specifications and costs involved. Mr. Gray was hopeful that such an undertaking might be made in the near future.

I suggested to Dr. Bhabha that, before Canadian authorities could give consideration to this project, it would be necessary for the Indians to submit their proposals in writing. I understand this is to be done fairly soon.

Mr. Gray asked Dr. Bhabha if the Indians were prepared to undertake an obligation to purchase only Canadian fuel in addition to the fuel which the Indians could make available from their own sources. Dr. Bhabha and Mr. Thapar both agreed that this was a fair proposition and said that the Indian authorities would be glad to give a guarantee not to purchase fuel for a Candu reactor from any other foreign source than Canada.

I shall communicate with you immediately upon receipt of a specific proposition from the Indians.

I have received from Dr. Bhabha the following letter, Begins: “I am writing this in continuation of the conversations we had in the presence of Mr. J.L. Gray, President of AECL in Delhi recently.The Government of India in the Department of Atomic Energy would be glad to purchase 25 tons of uranium concentrate (U3O8) from Canada. This will be converted into uranium metal and then fuel elements for Canada-India reactor in our plants at Trombay. We are prepared to pay for this U3O8 a price competitive with the lowest price offered to us at present (this is in the neighbourhood of $5 per lb. and the exact price can be communicated to you, if required, from Bombay). We are also prepared to give an undertaking that this U3O8 or an equivalent quality of uranium from stocks with us at present will be used solely for making fuel elements for the Canada-India reactor. In short, we are prepared to accept this uranium, mutatis mutandis, under the existing agreement with Canada for the supply of fuel rods for CIR.As more rods are likely to be required by the middle of March, the matter is extremely urgent, and I shall be very grateful if you would send me an early reply.”Please advise.

[C.A.] RONNING

568. DEA/14003-J-2-3-40

Memorandum from Head, Economic (1) Division, to Under-Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], February 7, 1961

Fuel Rods and Uranium Concentrate for India: Safeguards Policy

We now have two requests from India for additional fuel for the CIR. A formal application has been made by the Indian financial authorities to have the second batch of one hundred fuel rods (which is already in India) transferred under the Colombo Plan on the “same confidential terms” as the first. Certain fuelling difficulties are being encountered in the CIR and Dr. Bhabha considers provision of the second batch of fuel rods so urgent that he has offered to take them on a commercial basis if necessary. Mr. J.L. Gray, when he was in India recently, agreed that the matter was urgent. In addition to the request for fabricated fuel rods, Dr. Bhabha has now confirmed in writing to Mr. Ronning that he wishes to buy 35 tons of uranium concentrate. India would guarantee that this would be used solely to fabricate fuel rods for the CIR and would be subject to the same conditions as were accepted by India for the first batch of rods.

It seems that Canada has an interest in assuring adequate supplies of high standard fuel for the CIR, since a technical failure in the reactor would be unfortunate. Moreover, we certainly wish to expand our Indian market for uranium and other nuclear supplies provided we can do so without prejudice to our principles.

On the other hand, we must expect that it will become increasingly difficult to keep our arrangement with the Indians confidential. The other day, for example, the Japanese Embassy had been instructed to ask about the safeguards provisions for the CIR. (Needless to say, we told them nothing about the fuel rod agreement.) Furthermore, at this time, when the IAEA safeguards have just been approved by the Board of Governors we should take particular care not to become involved in what could be represented as a secret transaction contrary to our openly professed principles.

The terms of our agreement with India do, at any rate as applied to this particular reactor, offer reasonable guarantees against diversion; their being made known would thus help to prevent the kind of rumour and insinuation about the CIR that has been circulated since the Israeli reactor has been in the news.

All of the above considerations suggest that we should now try to reach a new basis of understanding with the Indians – at any rate to the extent of refusing to keep our future agreements confidential. On the Indian side Dr. Bhabha’s repeated attempts to buy more fuel for the CIR from Canada could mean that he has encountered difficulties in securing it elsewhere and that he could consequently be persuaded to move nearer our point of view.

I understand that Mr. J.L. Gray is due back in Ottawa toward the end of this week, and you will undoubtedly wish to discuss with him in the light of his recent visit to India, his views on the feasibility of making a fresh approach to the Indians.

O.G. STONER

569. DEA/14003-J-2-3-40

Memorandum from Under-Secretary of State for External Affairs to Secretary of State for External Affairs

CONFIDENTIAL Ottawa, March 1, 1961

Further Atomic Energy Cooperation with India

Three suggestions have recently been made for enlarging our cooperation with India in the nuclear field. The first two concern additional fuel for the Canada India reactor; the third relates to the possibility of Canadian Indian cooperation in the construction of a CANDU type power reactor in India.

A formal proposal regarding the third project has not yet been received from the Indian authorities, but several preliminary discussions with Dr. Bhabha and among senior officials here in Canada have suggested that we should follow up the proposal when it is received and should explore the relative advantages of financing under the Colombo Plan or by means of a long term export credit under Section 21A of the Export Credits Insurance Act. Whether or not the project is found to be feasible would depend upon the outcome of a preliminary survey which Atomic Energy of Canada Limited would propose to carry out in cooperation with India and with the assistance of staff seconded to them by Montreal Engineering. This is the kind of arrangement used to establish AECL’s Nuclear Power Plant Division, which is now designing the Douglas Point Power Station (CANDU). The survey would last 3-6 months and the Canadian costs of it might amount to about $50,000. which AECL would be prepared to pay if the Canadian Government would be willing to have the project explored. When the Indian request has been received, it will be possible to consult Ministers about a submission to Cabinet. In the meantime, however, as there is some urgency about dealing with the two requests for fuel for the CIR, I should like to devote the remainder of the present memorandum to this subject.

Second 100 Rods. Some fuelling difficulties have been encountered in the reactor which have led to an urgent need for additional fuel elements and the Indian authorities have formally requested that a second 100 rods be made available under the Colombo Plan. You have already indicated in response to a memorandum from the External Aid Office recommending that this request be favourably considered that you wish it to go to Cabinet.

Request for 25 Tons of Uranium Concentrate. In view of the immediate need for more fuel in the CIR, Dr. Bhabha has indicated in writing that he would be prepared to buy 25 tons of uranium concentrate in Canada provided it can be offered on competitive terms. He states he would undertake to use the Canadian uranium only in the CIR and on the same safeguards conditions as applied to the rods. Canada is interested in assuring adequate supplies of high quality fuel for the CIR since a technical failure in the reactor would damage our reputation as a leader in nuclear technology. Moreover, we certainly wish to expand our Indian market for uranium and other nuclear supplies provided we can do so in a manner consistent with our policy on safeguards. It is, however, a new departure to supply uranium rather than fabricated fuel rods for use in the CIR. You may therefore wish to consider whether the Indian request should be put to Cabinet or whether it would be sufficient to seek the views of the Ministers most concerned.Footnote 58Dr. Bhabha has indicated with reference to safeguards that he would be prepared to accept the “same confidential terms” for both the uranium concentrate and the second batch of fuel rods as applied to the first batch. Rumours as to the details of the confidential arrangement have always been current and have tended to suggest that the arrangement may be more lax than it really is. It would prevent these rumours and would make our position more easily defensible vis-à-vis other Western suppliers if we were free to acknowledge the terms on which we have cooperated with the Indians. I would recommend therefore that, if it is decided to offer India the fuel rods under the Colombo Plan and to authorize the sale of the 25 tons of uranium concentrate for use in the CIR, we should try to get Dr. Bhabha to agree that the terms of our arrangement with India need no longer be kept confidential.Footnote 59

N.A. R[OBERTSON]

570. DEA/14003-J-2-3-40

Permanent Representative to European Office of United Nations and Representative to International Atomic Energy Commission to Under-Secretary of State for External Affairs

I feel that I should submit my comments on this transaction in view of the effect it may possibly have on Canada’s efforts to achieve an agreement among western suppliers relating to the application of safeguards to bilateral sales.

Before commenting on the present transaction, I must go back to the agreement with India completed on February 6, 1960 for the supply of 100 fuel rods for the CIR reactor. I was in Vienna in September 1959 when Mr. J.L. Gray was negotiating with Dr. Bhabha on this subject. In Vienna telegram 147 of September 28, 1959,Footnote 60 Mr. Gray sent you the text of an agreement which he had worked out with Dr. Bhabha and which the latter was apparently willing to recommend to his government. The draft agreement included two paragraphs, No. 3 and No. 6, which together constituted the essence of the safeguards in the agreement, although the word “safeguards” was not used because of Dr. Bhabha’s opposition. Paragraphs 3 and 6 read as follows:

Canada, through AECL has the right to assure itself that the fuel elements supplied by Canada and the fissionable material (plutonium) produced in these elements are used only for peaceful purposes.“6. Canada will have the right at any time to ask for a joint audit, both physical audit and record audit. Whenever Canada exercises that right, the report will be produced jointly by India and Canadian representatives.”In Vienna telegram No. 148 of September 28, 1959,† I gave my views as follows:“I agreed with Gray that he should submit to you the draft settlement he reached with Bhabha because of over-riding importance to Canada in ensuring that satisfactory fuel (i.e. Canadian made) is available when reactors ready to start. I must, however call to your attention fact that safeguards are much disguised in this draft which was best draft Gray could get. We may have difficulty later on justifying ourselves to USA and UK in view of informal understanding that they should insist on safeguards in bilaterals. Also when proposed settlement with India becomes public subsequent negotiation of bilaterals containing customary safeguards clause may become more difficult.

Despite these worries I think we should approve draft settlement.”

ou raised several questions relating to this draft in your telegrams No. ET-1258† and ET-1260 of September 30, 1959† addressed to me in Vienna. As Mr. Gray had by that time left Vienna, I consulted with Dr. Bhabha and reported the results in Vienna telegram No. 155 of October 1.Footnote61 After reporting Dr. Bhabha’s reaction to the points which you had instructed me to raise, I said in this telegram:“Bhabha for his part raised important point on instructions from his superiors. They want paragraph 3 deleted as being redundant in view of paragraphs 6 and 7. I argued strongly against this. In the end we both agreed to recommend the following:(1) Paragraph 3 to be moved to more logical position immediately after present paragraph 5.(2) Words “to the extent provided in paragraphs 6 and 7 below” to be inserted in present paragraph 3 immediately after “assure itself”.”This position was reiterated in Vienna telegram No. 162 of October 7.† I then returned to Geneva and the further negotiations were carried on by others. The next thing I saw was the report in your telegram ET-1458 of November 13, 1959 giving “the latest draft of the agreement … which Gray will inform Bhabha that we are prepared to accept.” Paragraph 3 of the Vienna draft quoted above did not appear in the text given in telegram ET-1458 but paragraph 6 remained. The textFootnote 62 as given in ET-1458 was the text which was eventually signed on February 6, 1960. Telegram ET-1458 did not explain why paragraph 3 had been dropped. As this telegram indicated that the matter had been definitely settled, I decided at the time not to offer any comments on this omission. I would like now, if I may, to say that I think the omission was a mistake in the light of the Canadian desire to achieve an agreement among western suppliers for the inclusion of meaningful safeguards clauses in bilateral agreements. I am sorry that I did not submit my views in November 1959.

It was with the greatest reluctance that I decided in Vienna on September 28, 1959 to endorse the draft text which Mr. Gray sent you in telegram No. 147. I thought, however, that this text was justifiable in view of (1) the fact that paragraphs 3 and 6 taken together gave the substance of safeguards albeit without the name, (2) the terrible prospect of India finding itself unable to commence operation of the CIR reactor because they did not have properly made fuel rods, and (3) the facts that the basic CIR agreement had been signed in 1956 months before the Statute of the I.A.E.A. was signed and that the supply of fuel rods for the initial fuelling of the reactor might reasonably be regarded as linked with the original transaction. These justifications for supplying the 100 rods without safeguards of I.A.E.A. type were, to my mind, greatly weakened by the dropping of paragraph 3. I am afraid that we are going to have difficulty in justifying this text to Australia and South Africa when it becomes known to them. At the same time, I recognize that, according to the telegrams which you referred to Geneva for information in November and December 1959, the United States and United Kingdom authorities made no comment when informed in confidence of the text of the agreement of February 6, 1960.

Now it has been decided to make a further sale to India of 25 tons of uranium concentrate on the same conditions relating to safeguards as were stated in the agreement of February 6, 1960. It seems to me that it will be more difficult to justify the second sale than the first. We are no longer faced, as we were in late 1959, with the nightmare possibility that the reactor would not be able to start operation for lack of proper fuel rods. The reactor is in operation and all the appropriate ceremonies have taken place. There is much less reason to make a second sale of uranium on doubtful safeguards terms than there was for the first sale. Against my argument there is the fact, which I cannot argue away, that paragraph 1 of the 1960 agreement contemplates more than just the initial sale of fuel. Para. 1 says:“1. Canada will supply fuel elements, if required by India, for use in the Canada India Reactor on commercial terms in quantities mutually agreed to from time to time. The initial supply of fuel elements by Canada will consist of one hundred (100) rods of uranium with end plugs clad in the inner aluminium sheath.”Perhaps we are legally bound by this to sell additional fuel elements “on commercial terms” when India needs them. But are we bound to sell concentrate, and are we obliged to provide “Colombo Plan financing” – which I presume means a gift?

There is another reason why, in my view, the second sale will be harder to explain. When the first sale was being negotiated in late 1959, the I.A.E.A. was still in the throes of trying to work out a safeguards system for the Agency and the outcome was uncertain; this fact was mentioned in your telegram ET-1460 of November 20, 1959Footnote 63 as one of the points to be made to the United States and United Kingdom when they were shown the text of the proposed agreement with India. At the present time the situation is entirely different. The Board of Governors of the I.A.E.A. did at last in January 1961 legislate to establish the principles and procedures of safeguards for the Agency.

I felt it my duty to set forth in this letter my misgivings about the sales to India, even though the second sale has apparently been decided upon and it is no doubt too late to reconsider the advisability of proceeding with it under the terms of the February 6, 1960 agreement.

If the Indians agree, as proposed in your telegram E-478, to remove the confidential label from that agreement, I presume that its text will either be published or at least be made generally known to interested governments and that the second sale will also become known. May I suggest that officials in Ottawa might consider whether a statement of explanation (of the safeguards aspects of the agreement) might be prepared in order that it could be used if necessary in subsequent discussions with Western supplying governments or other governments concerned with the development of a safeguards system. Such a statement may also be needed in the I.A.E.A. Board of Governors, as representatives of governments hostile to safeguards may try to use the text of our agreement with India as a basis for questioning Canada’s devotion to the cause of safeguards; certainly no scruples and no questions of logic will deter the Soviet Governor from doing this if he thinks it may help him to score a debating point.

Bhabha called on me yesterday. I said you were most anxious to make public safeguard terms agreed upon for sale of rods and uranium concentrate for use in CIR as we thought further concealment was not repeat not in best interests of our cooperation in atomic development. Bhabha was not repeat not anxious to have it known that India had deviated somewhat from its position on safeguards and inquired about our reasons for requesting publicity. I quoted to him extracts of telegrams regarding UAR and other Arab nations fears based on unfounded rumours about atomic reactor in Israel.† Bhabha seemed anxious to continue cooperation with us particularly in a CANDU type power reactor and accepted our suggestion that terms should be announced publicly. He asked however that suitable preamble should explain our reasons for safeguard terms of our agreement. The preamble would state the compromise was reached only for a specific case (the CIR) and does not repeat not represent any departure from our respective attitudes to principle of safeguards. He is leaving India but said he would try to send us a draft of his proposed preamble before his departure on April 5.

Bhabha again discussed possibility of Canadian-Indian cooperation in a CANDU type power reactor and asked if aside from question of finance (he seems confident that since power reactor to be established near Delhi is included in third plan financial provisions will be made.) Canada would cooperate under an agreement with terms similar to that of Canada-India reactor in Bombay. He repeated that India was prepared to use fuel only from Canadian sources in addition to fuel which India could provide from its own sources. He was sorry that due to other duties it had not repeat not been possible as yet to send an Indian scientist to Canada to work with Gray in investigation suggested by Gray during our conversations here [Group corrupt].

[C.A.] RONNING

572. DEA/14003-J-2-3-40

Permanent Representative to European Office of United Nations and Representative to International Atomic Energy Commission to Secretary of State for External Affairs

I neglected to comment on paragraph 2 of Delhi telegram 236 March 25 which reported Bhabha’s inquiry whether Canada would cooperate on a power reactor on terms similar to those applicable to CIR reactor. I presume that word “terms” refers inter alia to safeguards terms agreed in February 1960 for CIR fuel rods.

In view of discussion of this question in Delhi telegram 318 I consider it my duty to submit my views as Canadian representative to IAEA. In my letter 186 March 14 I explained my misgivings about extending February 1960 safeguards terms to the proposed second sale of Canadian fuel for CIR reactor. It follows that from my viewpoint it would be very undesirable to use February 1960 safeguards terms for an entirely new transaction i.e. a power reactor. Situation would be quite different if USA and UK were to give their blessing in advance but there is no repeat no reason to think that USA would agree to what Bhabha wants from Canada.

We have been reflecting further on problems raised in our telegram 318 April 21† in light of comments in Geneva telegram 386 April 25. From point of view of this mission it would be advantageous for our relations with India (and Western relations generally as UK recognized in paragraph 1 of their memorandum)Footnote 64 if Canada could participate in design, construction fueling and financing of a power reactor in Delhi area where it would be a conspicuous monument. We would observe it would be an equally conspicuous Soviet showpiece if they did the job. We have therefore considered whether a case might be made which would secure USA and UK acquiescence in an arrangement based on February 19, 1960 safeguards agreement for fuel provision in conjunction with a document like 1956 CIR agreement for design construction and financing.

Apart from fostering our relations with India our participation in a power reactor project would ensure that a substantial proportion of Indian uranium imports would continue to be safeguards of some kind thereby eroding Indian position of principle. (It will be interesting to see next month what conditions regarding safeguards are included in tenders for Tarapur.) We would emphasize certainty that India will construct additional nuclear power stations even though there may be only Tarapur plant during third plan period and they can get equipment and uranium without safeguards from Soviet bloc. We would observe that every power reactor built with no repeat no safeguards at all on its fuels would appear to erode UK-USA position more than any arrangement which accepted principle of safeguards.

We suggest that overall problem might be examined in concrete terms such as number of power reactors which non-communist countries resisting safeguards are likely to be able to finance from their foreign exchange resources up to 1970 (target date mentioned in UK memorandum paragraph 3(b)). Our estimate for India would not repeat not go beyond four completed in that period namely Tarapur plus Delhi project and one or possibly two others financed under fourth plan. We would be interested in an overall estimate for all countries in this class. If USA insists on elaborate safeguards on equipment as well as fuel and UK, Canada and other possible Western suppliers confirm, result by 1970 may well be establishment in India and other countries resisting safeguards of Soviet bloc as only source of uranium and power reactor equipment.

We would draw attention to article 11 of CIR agreement which provides in effect that “fuel elements” for that reactor would not repeat not be imported from any source other than Canada. Apart from assuring a uranium market inclusion of a comparable clause in a power reactor agreement would appear to ensure that safeguards along February 1960 lines could be applied to all fuel elements other than those manufactured in India. Presumably wording could be tightened up in view of Bhabha’s hints reported in paragraph 2 our telegram 157 February 27 in order to ensure its application not repeat not only to “fuel elements” but also to imports of uranium in any form for both initial charge and continuing requirements.

Indians might well resist such a provision as going beyond February 1960 terms if it were first advanced in safeguards context. However Bhabha might be persuaded to include it in a basic project agreement as reflecting a reasonable desire to guarantee an exclusive market for Canadian uranium in return for our financial and engineering assistance. Unless Indian uranium sources expand considerably in next ten years practical effect of such a clause would be to facilitate application of safeguards agreed in detail later to all fuel in power reactor at all times up to at least 1970. In safeguards agreement we could provide for their application to equivalent quantities drawn in emergencies from other sources pending Canadian deliveries in light of experience with second CIR charge.

Article 11 also provided that subsequent agreement for provision of fuel should be in keeping with principles of International Agency which was then only a future concept. Equivalent clause in an agreement today presumably would provide that any safeguards procedures adopted by IAEA should govern provision of fuels. We suggest that by such means principles of safeguards can be demonstrated to be defended.

In all foregoing we are assuming that there is no repeat no concern that India might attempt clandestine diversion of plutonium for weapons purposes and that terms of a Canada-India agreement would be important only as a possible precedent. It seems to us moreover that precedent would only be important if there were several countries resisting safeguards but without prospects of Soviet aid which were in a position to press UK and USA for power reactors and fuel and which were suspect of intent to divert fuels clandestinely to weapons.

It seems to us that degree of our interest in this matter is related to question whether Canada might be prepared in next year or two to undertake external costs of a power reactor in India. If we are unlikely to be so prepared it would appear undesirable to this mission for Canada to exercise anything other than a liberalizing influence on UK and (USA?) policy. If there is a possibility of Canadian financial aid for this purpose desirability of exerting such an influence seems even greater.

Removal of Confidential Restrictions.As you know our request here applied to all the agreements on fuel, i.e. both the fuel rods and the uranium concentrate. Paragraph 3 of our telegram E-928† may have misled you; we have always recognized that India has as much interest as Canada in protecting itself against “misinterpretations.” It is in fact our estimate of the very strong views the Indians hold on the subject that makes us reluctant to “give an undertaking” to interpret them to third parties. If however Bhabha wishes to prepare a written statement we could undertake to make it available when appropriate – provided of course that it did not appear to us to misrepresent our own position in this matter. We still consider however that the simple and uncomplicated approach outlined in our telegram E-928 is to be preferred.

Fuel Rods.You may wish to bear in mind that in your letters or discussions with the Indians it would be advisable to avoid use of the word “safeguards” since it is associated in their minds with the agency safeguards which they have strenuously opposed. We have not seen the texts of your exchange of letters with the Ministry of Finance and so do not know exactly what the present position may be. Paragraph 2 of your telegram 388, May 12, suggests that it may have dealt with both fuel rods and concentrates. If however it referred only to the rods and not repeat not to the concentrates, a letter along the following lines should go to Bhabha in his capacity as Secretary to Government of India. Text Begins:“Refer to the 100 rods of uranium which, as I mentioned in my letter of (date to be supplied) to the Ministry of Finance, are to be provided to India under the 1960-61 Colombo Plan programme. In accordance with the reply of (date to be supplied) received from the Ministry of Finance, it is my understanding, which I would request you to confirm, that the Government of India proposes to apply to these fuel elements the same arrangements as were set out in the exchange of letters effected between us on February 6, 1960.” Text Ends.

Uranium Concentrate.Since the February 1960 agreement will apply to the concentrate mutatis mutandis and since there will be the additional undertaking (volunteered by Bhabha) that the concentrate will be used only in the CIR, this transaction will have to be covered by a separate exchange. It will probably be necessary to modify certain technical details in which the requirements set out for the rods would be inappropriate. We are working on this problem now and shall let you have a suggested draft text, but we do not wish you to discuss with the Indians the terms of this arrangement until we receive confirmation from them that they in fact intend to buy the concentrate.

575. DEA/14003-J-2-3-40

Annex to Agenda of Meeting of Advisory Panel on Atomic Energy

SECRET [Ottawa], May 30, 1961

Safeguards in Atomic Energy Cooperation with India: Summary of Considerations

The Canadian High Commissioner’s Office in New Delhi has now received a formal request from Dr. Bhabha that Canada agree to carry out a preliminary survey to determine where in a specified region of India and with what necessary modifications a CANDU type power reactor might be built by the Indians with Canadian technical and financial assistance. Though it is only a preliminary feasibility study that is in question at the moment, it is not advisable to embark upon such a study without having formulated a clear idea of the safeguards conditions we shall wish to attach to any resulting joint project. A second point is that Canada is to be represented at a meeting of western suppliers on June 12 to 14 at which the United States hopes to secure renewed support for the continuance of a common front on the maintenance of bilateral safeguards comparable in effectiveness with those of the IAEA. Our position at this meeting would be difficult unless we had a pretty clear idea of what stand we wish to take on safeguards for India.Dr. Bhabha has already indicated that India would accept for a CANDU reactor the same conditions that were agreed upon in 1956 for the CIR, and would use fuel only from Canadian or Indian sources (Delhi telegram 236 of March 25). If an agreement were negotiated along these lines, there would in effect be no safeguards on the reactor itself but a simple pledge on the part of India that the reactor and any products resulting from its use will be employed for peaceful purposes only. An agreement on the fuel similar to that of February 6, 1960 would provide for joint audits, both physical and record (to be made by mutual consent) of the Canadian fuel and of the plutonium produced therefrom (or of an assessed equivalent quantity). There would be no safeguards on the Indian fuel.Two other power reactors (at Tarapur) have been programmed by India on which international bidding opens today (May 31). It is thought that the French might bid on them. Several United Kingdom firms are interested and the United Kingdom has accordingly suggested to Canada and the United States that special terms might be offered to the Indians (Aide Mémoire April 14, 1961).† Four possible concessions were suggested:

Safeguards would be dropped if a cut-off on the production of fissile material for military purposes were put into operation in India under an international control system of which both India and the United Kingdom were members;

Provision would be made for a review of the safeguards provisions at the end of ten (or possibly five) years;

Safeguards on produced fissile materials would not be extended beyond the first generation;

The safeguards provisions should be made reciprocal.

The United States has indicated that it could accept (a) and (b) and we understand that it would in fact probably be able, if necessary, to accept (d). It would, however, prefer that any approach to the Indians should include as an alternative what is known as the “equivalent deposit concept” (used in our own agreement with the Indians). Point (c) the United States are not prepared to concede, on the grounds that Article XII 5 of the IAEA Statute specifically requires safeguards on succeeding generations of produced material and that the exception in the IAEA safeguards applies only to reactors of less than 100 mw thermal power. They are not willing to extend the exception on an ad hoc basis to Indian power reactors which they claim will have a military potential by 1967-70 (Washington telegram 1300 of May 19).†We ourselves replied to the United Kingdom enquiries in general terms that we thought their suggestions were useful and should be further examined. We do not know whether they have yet taken them up with Australia and South Africa, the other members of the “Ottawa group.”In considering whether we wish to adopt either of the above approaches to the Indians, we shall have to take account of two principal points: how far either is likely to be accepted by the Indians and how far each is compatible with our general policy and with our specific obligations under the IAEA. Extensive comments on both these points from New Delhi and from Mr. Wershof and Mr. Goldschlag are contained in the following telegrams: New Delhi 318 of April 21;† 391 of May 15; Geneva 346 of April 19;† 679 of May 24.†

576. DEA/14003-J-2-3-40

Memorandum from Under-Secretary of State for External Affairs to Secretary of State for External Affairs

SECRET [Ottawa], June 1961

Candu Power Reactor for India: Feasibility Study

As mentioned in our Memorandum to you of March 1, the President of Atomic Energy of Canada Limited and senior Canadian officials have discussed with Dr. H.J. Bhabha (Chairman of the Indian Atomic Energy Commission) the possibility that Canada and India might cooperate in the planning and construction of a 200 megawatt power reactor of the CANDU type, fuelled with natural uranium, moderated and cooled by heavy water. There was general agreement that before proceeding with any such project it would be necessary to carry out an extensive preliminary survey in order to assess its economic feasibility and cost and to determine what modifications in the CANDU design might be required by reason of climatic or other special conditions. If the Government approved, Atomic Energy of Canada Limited would be prepared to pay for and to carry out this survey (estimated to cost up to $100,000) with some help from an outside firm of consultants – most probably Montreal Engineering.

The Office of the Canadian High Commissioner in New Delhi has now received a formal request from Dr. Bhabha on behalf of the Government of India that we proceed with the preliminary survey in association with Indian engineers of the Department of Atomic Energy. It is suggested that the study should be undertaken at an early date so that the Indian decision to go ahead if the results are favourable could be taken before the end of this year.Senior officials of the Departments concerned have again examined this matter and recommend that the survey be proceeded with, in view of the political importance of continued cooperation between India and Canada in the atomic field and the possible economic advantages related to opportunities to supply equipment and uranium to India. This recommendation is made on the understanding that any resulting proposal for Canadian assistance in constructing a reactor would be strictly examined in the light of its financial and economic viability. The relative merits so far as Canada is concerned of financing the foreign exchange component under the Colombo Plan or under Section 21A of the Export Credits Insurance Act would also require examination if it were decided that Canada should undertake to assist in the financing.

Another consideration that should be taken into account before embarking upon the survey is our position on the safeguards to be applied to any project that might eventually be decided upon. The International Atomic Energy Agency (IAEA) safeguards, which Canada has strongly supported, apply to reactors of up to 100 megawatts (thermal) power. The IAEA hopes that by the time reactors of over 100 mw are likely to be available for general use suitable criteria for the extension of safeguards to such reactors will have been developed. Dr. Bhabha has already informed us that India would accept an arrangement similar to that worked out for the Canada – India reactor and its fuel. This would mean, in effect, that there would be a joint audit and accounting system for the Canadian-supplied fuel but no safeguards on the reactor itself. It is however the impression of those who have discussed the matter with Dr. Bhabha that it would be possible to work out a mutually acceptable arrangement by which safeguards could be applied to the reactor as well as the fuel. Any other course would be inconsistent with our established position of support for the IAEA and its system of safeguards, both of which have come into existence since the original CIR agreement (on the reactor) was signed in 1956.It is therefore recommended that our reply to the Government of India, though not requiring the conclusion of a safeguards agreement now as a condition precedent, should make it clear that the survey is being undertaken in the expectation that, should any joint project be undertaken as a result, mutually acceptable provisions for safeguards on reactor and fuel could be worked out. A suggested draft along these lines† is attached for your approval.Footnote 65 I understand that similar Memoranda are being sent to the Ministers of Finance, Trade and Commerce, and to Mr. Churchill as Chairman of the Committee of the Privy Council on Scientific and Industrial Research.

Following letter received from Bhabha. “I refer to your letter dated (May 25?) regarding the supply of an additional 100 rods of uranium for the Canada-India reactor under the 1960-61 Colombo Plan programme, and confirm that the Government of India proposes to apply to these fuel elements the same arrangements as were set out in the exchange of notes effected between us on February 6, 1961.” We suggest that this reply should complete official exchange on subject and that agreement might now be effective.

Bhabha’s letter as quoted in your reference telegram is satisfactory and we now regard the agreement as being in effect.

579. DEA/14003-J-2-3-40

Memorandum by Economic (1) Division

CONFIDENTIAL [Ottawa], November 7, 1961

Canadian Atomic Cooperation with India: Safeguards on Candu Project

At a meeting on November 3, 1961 attended by Messrs. A.E. Ritchie, J.L. Gray, A.W.F. Plumptre and G.G. Steele (Treasury Board), the following agreement was reached about safeguards on a CANDU reactor which might be built in India with technical advice and assistance from Atomic Energy of Canada Limited.

It was recognized that in the spirit of the IAEA Safeguards Agreement and also because India is a test case when it comes to safeguards requirements, there might be some obligation upon Canada to require safeguards on a CANDU reactor even if Canadian assistance were to consist chiefly of advice and know-how.

It was noted that Mr. J.L. Gray, in his letter of October 31 to Dr. Bhabha,† had pointed out that the question whether the Canadian Government would require safeguards on the reactor itself would have to be discussed further with Government officials.

It was agreed that no further action than the above under 2 need be taken until it was certain that the project would in fact get under way.

[H.D. BURWASH]

Section D - Ghana

Sub-section I

French-speaking Military Instructors

580. DEA/10283-A-3-40

Memorandum from Under-Secretary of State for External Affairs to Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], February 22, 1961

Provision of Military Personnel to Instruct Ghanaian Cadets

Last December the Prime Minister of Ghana wrote to Mr. Diefenbaker asking him if Canada could provide some French-speaking military instructors to teach French and other academic subjects to cadets in the Ghana Military Academy.Footnote 66 The Prime Minister indicated that he would be prepared to examine a recommendation from the Departments concerned. I therefore wrote to the Chairman, Chiefs of Staff, bringing the matter to his attention and in his reply of February 16, Air Marshal Miller indicated that it may be possible to grant the Ghanaian request, although – since this is not the sort of thing which provides tangible military benefits to Canada – the Chiefs of Staff would not themselves place a high priority on the request. If on other grounds, however, meeting the request were considered important, National Defence would be prepared to send an officer to Ghana to look into the matter. The departmental view is that the request should be met not on grounds of military benefit to Canada but on grounds of the great desirability of not refusing, at the present time especially, Commonwealth aid to Ghana whenever it is possible to grant it. There is increasing evidence that Ghana will turn to the Communist bloc for assistance when it has not been forthcoming from the West and it would be unfortunate if unbiased advisers should no longer be present in Ghana particularly on matters such as the training of Ghanaian cadets which could offer such easy targets for indoctrination by unscrupulous instructors.

If you agree you may therefore wish to sign the attached letter to the Minister of National Defence† urging that an officer be sent as soon as possible to Ghana.

You may think it desirable to bring the matter to the Prime Minister’s attention before writing to Mr. Harkness and I attach a brief covering Memorandum to the Prime Minister for your initials bringing him up-to-date on where the matter stands at present.

N.A. R[OBERTSON]

[ENCLOSURE]

Memorandum from Secretary of State for External Affairs to Prime Minister

CONFIDENTIAL [Ottawa], February 22, 1961

Provision of Military Personnel to Instruct Ghanaian Cadets

You will recall that in December, in a letter to you, President Nkrumah asked if Canada could provide French-speaking military personnel to instruct Ghanaian cadets in French and other academic subjects. The Chairman, Chiefs of Staff, has informed by Department that it may be possible to grant the request and that as a first step they would propose to send an officer to Ghana to look into the matter although they do not consider the request of a high priority from the military standpoint. In my view the request should be met not on grounds of military benefit to Canada but on grounds of the great desirability, particularly at the present time of aid to Ghana in a Commonwealth context not being refused whenever it is possible to grant it.

Since I believe you might like to be able to tell Dr. Nkrumah when you meet him in London that favourable consideration is being given to his request, I am at this stage submitting to you a letter† which if you approve I propose to send to my colleague, the Minister of National Defence.

You will be interested to know that following his meeting on Sunday, March 12 with President Nkrumah, the Prime Minister instructed us to inform departments concerned that they should go ahead with preparations to meet Ghanaian request for French speaking military instructors.

It is proposed by National Defence that Colonel P.S. Cooper, who is presently at army headquarters, will leave as soon as possible for Accra. The time of his arrival there will be advised as soon as available. Colonel Cooper has been selected for this task in that he is a former commandant of Royal Roads and is therefore completely familiar with our military college system. In addition he has had all the inoculations, etc., necessary for him to proceed at once.

Colonel Cooper is being briefed to examine all aspects of the request with the Ghanaian authorities but he is being cautioned not to make any commitments in this matter.

582. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], June 1, 1961

Present

The Prime Minister (Mr. Diefenbaker) in the Chair,

The Secretary of State for External Affairs (Mr. Green),

The Minister of Transport (Mr. Balcer),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of National Defence (Mr. Harkness),

The Minister of Citizenship and Immigration (Mrs. Fairclough),

The Postmaster General (Mr. William Hamilton),

The Solicitor General (Mr. Browne),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of National Health and Welfare (Mr. Monteith),

The Minister of Agriculture (Mr. Alvin Hamilton),

The Minister of Defence Production (Mr. O’Hurley),

The Associate Minister of National Defence (Mr. Sévigny),

The Secretary of State (Mr. Dorion),

The Minister of Northern Affairs and National Resources (Mr. Dinsdale),

The Minister without Portfolio (Mr. Halpenny).

The Secretary to the Cabinet (Mr. Bryce),

The Assistant Secretary to the Cabinet (Dr. Hodgson).. . .

Provision of Canadian Military Training Assistance to Ghana

The Minister of National Defence said that, following upon the exchange of correspondence between the Prime Minister of Canada and the President of Ghana regarding the provision of Canadian military training assistance to the Armed Forces of Ghana, a senior Canadian officer had investigated the matter in detail. Altogether the Ghanaian request would involve from 26 to 29 officers and men. Most of the kinds of personnel requested could be made available, but only one out of three medical officers requested could be spared for the purpose.If this request should be acceded to, some of the personnel might be drawn from the militia. This would provide valuable experience to the militia personnel without depleting the ranks of the regular forces.An explanatory memorandum had been circulated, (Minister’s memorandum, May 3 – Cab. Doc. 181-61).†

During the brief discussion some Ministers said that President Nkrumah appeared to have dreams of becoming the overlord of Africa, and that he might possibly seek the support of Communist Countries in seeking this objective.

The Cabinet approved the recommendation of the Minister of National Defence that military training assistance be provided to Ghana, including a military adviser to the High Commissioner and a maximum of about 30 officers and men, on the following basis.

that some of the required personnel should be drawn from the Canadian militia;

that Canada reserve the right to withdraw any or all military personnel at any time;

that Ghana undertake not to involve Canadian officers or men directly in aid to the civil power or in any military operations outside Ghana;

that Canadian officers and men may not undertake any activity contrary to their oath of allegiance to Her Majesty;

that the other terms of service and the legal status of the Canadian officers be determined following consultation between the two governments;

that Canada pay officers and men their normal pay and allowances;

that Ghana move officers and men and their families to and from Ghana, and provide such additional allowances, quarters and services as may be determined following consultation between the two governments;

that personnel made available under this plan be placed on the Special, Armed Forces Senior Appointments and Seconded Establishment List; and,

that it may not be feasible to satisfy completely the requirement for medical officers.. . .

Nkrumah last night handed General Alexander a letter terminating Alexander’s appointment and indicating that British officers as members of Ghanaian armed forces were no repeat no longer required. Nkrumah in this letter pointed out British policy in Africa necessitated this action. Nkrumah apparently told Alexander that in due course a request would be made of UK Government for a military mission coinciding with Nkrumah’s public announcement last night that Brigadier Otu had been promoted major general and appointed Army Chief of Staff. He also announced that in future command positions would be held only by Ghanaians.

I have just returned from seeing Alexander and he is extremely pessimistic about future. He thinks Nkrumah is “mad.” Nkrumah was dirty and untidy when he say him. Nkrumah apparently will listen to no repeat no reason and at one point in conversation remarked he did not repeat not care what happened to armed forces. He was also indifferent to (Butler?).

Alexander will leave Ghana on September 25. He is advising his British officers to remain on job until such time as Otu asks for them to leave.

Alexander’s (advice?) to us is that we should not repeat not take any precipitate action. At the moment Nkrumah’s venom is directed at UK. Alexander suggested however that we delay coming forward of any additional Canadian officers until situation is a little clearer. I recommend therefore that we accept General Alexander’s advice. We have already taken action to hold Sellar in London.

Alexander is doubtful whether UK Government will accept offer to provide military mission. He does not repeat not know whether Nkrumah has made arrangements with Eastern European countries to provide military assistance. He thinks we may be in for a difficult time with a called for calculated government policy of anti-white. Alexander has recommended to Snelling that UK High Commissioner’s Office prepare emergency plans.

I am seeking appointment with Nkrumah. Alexander expects however Nkrumah will tell me that he wishes Canadian team to remain.

The withdrawal of British officers has many implications as you well know. For time being I suggest we stand firm and take no repeat no precipitate action. If Nkrumah is or has become irrational his future actions are even more unpredictable. Although strikers are reported to have returned to work yesterday I do not repeat not think Nkrumah is out of woods. There may be an increased tendency to discover plot which may be laid at door of some Western countries. If Nkrumah’s anti-British mood becomes more pronounced it may affect his thinking about Commonwealth. His present mood may be simply an emotional reaction to current domestic problem. I understand Bing has been exerting himself with Nkrumah to vilify West.

Our communication facilities are slow and I would suggest our Mission in London and Washington keep in constant contact with CRO and State Department respectively. I have briefed USA Ambassador.

[B.M.] WILLIAMS

584. DEA/10283-A-3-40

Memorandum from Under-Secretary of State for External Affairs to Secretary of State for External Affairs

SECRET [Ottawa], September 25, 1961

Canadian Armed Forces Training Team – Ghana

On your instructions, and after consulting the Prime Minister, the attached telegram DL-1186 was despatched.

On the assumption that political rather than technical military considerations should govern a decision on whether to proceed as planned with military assistance to Ghana, we have drafted the attached instructions to Mr. Williams.† The danger of increasing Ghana’s dependence on the Soviet Union would, it seems to me, be only increased by leaving a vacuum which Nkrumah would be tempted to fill from Moscow. The argument over Alexander need not affect our own activities and is not at least wholly ideological.

This proposed telegram was drafted in concert with the Divisions concerned but has not, so far, been discussed with the Department of National Defence.

N.A. R[OBERTSON]

[ENCLOSURE]

Under-Secretary of State for External Affairs to High Commissioner in Ghana

Our reference telegram shows that three officers are to proceed from London.

We realize that the situation in Ghana is difficult and may worsen but for the time being the balance of political argument points toward carrying on the plans for Canadian military assistance without raising questions of principle. Unless unexpected developments occur the remaining personnel will proceed from Canada.

We would welcome your own further reporting on the situation but for the present please proceed with the plan in a normal manner. There seems to be a useful role for Canada and its usefulness will in part depend on dissociation from the situation arising from Alexander’s departure. We are satisfied that the UK would share this view.For London – Please convey the gist of this message to the UK authorities.

[HOWARD GREEN]

586. DEA/10283-A-3-40

High Commissioner in United Kingdom to Secretary of State for External Affairs

We saw K.A. East, Head West African Department CRO, this afternoon. He read to us from a telegram sent to CRO by Snelling following his interview with Alexander. Snelling confirmed that Nkrumah had told Alexander that UK action over Katanga had made it essential to remove UK officers from senior positions in Ghanaian armed forces. Remaining UK officers might in due course be requested to stay as the nucleus of a military mission. This was in line with announced Ghanaian policy of Africanization.

Privately Alexander told Snelling that he thought that Nkrumah’s decision, while in part the result of UK policy in Katanga, had also been influenced by the very unfriendly attitude of UK popular press to Ghana over the past few months, by a suspicion that British must somehow be behind the Takoradi strike, and finally by prolonged Soviet overtures culminating in Nkrumah’s recent visit to USSR. Alexander told Snelling that he thought that Nkrumah was definitely prepared to swing Ghana more closely into Soviet camp. Sir Robert Jackson has confirmed to Snelling that (although this had not repeat not yet been announced) all senior UK civilian employees of Ghana government will be asked to leave fairly shortly with the exception of Geoffrey Bing, who is to obtain a senior position at Legon University.

Snelling reported that an agreement had already been signed between Ghana and USSR, and would be shortly announced, for Russians to build dam on the Volta. As a preliminary measure Ghanaians have undertaken to build 200 air conditioned houses for Russians on the dam site to cost between 1.4 and 2 million pounds. As a result USA is sending Mennen Williams to Accra to investigate and USA officials told CRO today that Volta River agreement would definitely not repeat not be signed on October 5, according to original plan.

It is Snelling’s opinion that “the ruling clique,” whom he identified as Adamafio, Baako, Adjei, Boateng and Bing “alone have Nkrumah’s ear” and he takes a pessimistic view of the future.

Snelling considers all the above to represent the extreme left and because of their influence on Nkrumah he is now concerned for the possible safety of UK community and property in a prospective “lurch to the left.”

East said that Snelling had been instructed to seek an interview with Nkrumah as soon as possible and was to have seen him this morning. He is instructed to say that the termination of Alexander’s appointment in this abrupt manner without any prior consultation with UK is a cause of grave concern and that UK would be grateful to know what interpretation they should put upon it. Snelling is also to suggest to Nkrumah, that Mr. Sandys might go immediately to Accra for a heart-to-heart talk with Nkrumah to find out exactly what is on his mind. It had been the intention that Mr. Sandys should do this when he accompanied [the] Queen on her forthcoming visit to Ghana but it was now felt imperative that he should see Nkrumah immediately since the visit of Queen may now be in jeopardy.

On this point East observed that since it was clearly to the interest of Adamafio and his colleagues to secure the cancellation of the visit and to represent it as a triumph therefore UK would make no repeat no move at cancellation on their side. On the other hand CRO had UK public opinion to consider which has recently become markedly hostile towards Ghana. It is hoped, however, that if any cancellation has to be made it would be at Ghanaian initiative and on technical grounds.

In agreeing to see us as soon as CRO had news of Snelling’s interview with Nkrumah East said CRO view was that Nkrumah has become so progressively convinced of his personal infallibility that if anything went wrong he could not repeat not conceive that it was his fault. It must be due to outside pressures.

587. DEA/12304-40

High Commissioner in United Kingdom to Secretary of State for External Affairs

In conveying the gist of your reference telegram to CRO we learned from K.A. East, Head West African Department, that UK share the view expressed in it, regarding Canadian armed forces training team for Ghana.

East also let us see Snelling’s report of the interview which he had with Nkrumah on September 26. The interview was not repeat not entirely satisfactory to UK since Nkrumah was not repeat not prepared to say at this stage whether he would welcome the proposed visit from Mr. Sandys described in our telegram 3470 September 25. Nkrumah did say, however, that he had terminated Alexander’s appointment “with great reluctance” and under persistent pressure from Casablanca Powers who took the view that Ghana could not repeat not take its rightful place in leading African militant non-aligned opinion while its armed forces were directed by British officers. Nkrumah also expressed strong resentment at the attitude toward Ghana in the popular British press. He concluded by saying that he did not repeat not want to become involved in the cold war but that he must protect his non-aligned position. He said “I am not repeat not on the side of the Communists but on the side of Africa.”

Snelling thinks Nkrumah’s unwillingness to make a decision on Mr. Sandys’ visit was due to his wishing first to consult “the ruling clique” and also because of his suspicion lest Mr. Sandys might be coming to Ghana in a role similar to that cast for Mr. Mennen Williams (see our reference telegram). Snelling proposes to give Nkrumah 48 hours in which to reply and then to seek a further interview. We asked East how Mr. Sandys had taken this and he replied obliquely that Mr. Sandys was “not repeat not a good waiter.”

Snelling’s assessment of Ghanaian position, as outlined to him by Nkrumah and subsequently by Dei Anang, is as follows:

Snelling blames the press war between Ghana and UK for considerably worsening relations between the two countries;

Snelling believes Nkrumah’s statement regarding the pressure to which he was subjected by Casablanca Group;

Snelling believes that as a result of his visit to USSR Nkrumah is a tremendous admirer of Soviet and Communist achievement but that he is not repeat not a Communist or Communist inclined;

Snelling thinks it essential that if British officers have to go they should not repeat not be replaced by Communists and is inclined to think that Nkrumah’s decision to accept Soviet offer to train Ghanaian Cadets in USSR may have been a way of ensuring “Soviet training at a distance” (the relevance of this to the decision in your reference telegram to proceed with Canadian Armed forces training team in Ghana “in a normal manner” will be evident);

Snelling thinks the right in Ghana is in “complete disarray” and that the ruling clique alone has Nkrumah’s ear;

though Snelling regards Nkrumah as “sane,” he believes that he is haunted by fears of assassination arising from the recent revolt in Ghana against his administration (e.g. the Takaradi strikes and, if General Alexander is to be believed, the decision of 5000 Ghanaian soldiers to see him off at Accra airport contrary to strict instructions from Nkrumah’s office;

Snelling believes that equivocal UK policy over Katanga was relevant to Nkrumah’s decision to replace Alexander;

Snelling’s final assessment is that Nkrumah does not repeat not want to “break with the West” but that “if the West should decide to throw him over (presumably a reference to Volta River Agreement) Nkrumah undoubtedly would break with the West.” Summing up, Snelling describes the outlook as “gloomy but not repeat not beyond the possibility of remedy.”

588. DEA/10203-A-3-40

High Commissioner in Ghana to Secretary of State for External Affairs

TELEGRAM 328 Accra, September 28, 1961CONFIDENTIAL. OPIMMEDIATE (from London).Reference: London Telegram 3470 September 25.Repeat for Information: London, Washington, Permis New York from London.

Ghana Political Developments

In the light of conversations with Okoh, Secretary to Cabinet, and Sir Robert Jackson, among others, I am now satisfied that Nkrumah’s action in terminating General Alexander’s appointment does not repeat not in fact represent a departure from the well-established political course of this country. By the same token I am now inclined to think that Alexander’s assessment of the consequences of his dismissal as given to me and the UKHC is more indicative of his own emotional distress than of unbalance on the President’s part. It is entirely understandable that Alexander should be distressed under the circumstances but we must I think discount some of the more alarming conclusions which he was driven to draw.

According to Okoh the main factor which caused Nkrumah to take his characteristically precipitate action was pressure from his Casablanca partners, which came to a head during the last Cairo meeting on the African High Command. As you know it was agreed at that meeting that a UAR officer should be Supreme Commander. In exchange for their agreement the Ghanaians had counted on having the headquarters at Accra but found that their allies could not repeat not agree for reasons of security that the headquarters should in practice be open to British officers. This interpretation is borne out by a report this morning that El Ahram of Cairo had announced that the headquarters will be at Accra.

It is true that some Ghanaians have been aware for some time of the Casablanca group’s dissatisfaction at the position of British Officers in the Ghana Armed Forces. Although Ghanaians had resisted their pressure for some time it seems likely that the cumulative effects of what seem to them British Imperialist manoeuvres in Angola, Katanga and Northern Rhodesia were finally enough to tip the balance.

We cannot repeat not rule out the possibility that a military mission or missions from Soviet bloc countries will arrive here but I have so far seen no repeat no evidence that they are to be expected at present. The proposal to send Ghanaian cadets for training in USSR is being proceeded with in all haste, however. In spite of this it is Jackson’s opinion that Ghana Government’s actions in the military field are governed by considerations of African nationalism and not repeat not to any important extent by Communist manoeuvres.

I agree with Jackson and I think it most important at this time to emphasize that the weight of available evidence is clearly on the side of the view that Nkrumah is genuinely in pursuit of a non-aligned policy. There is still not repeat not in my opinion any “lurch to the left” as has apparently been spoken of by UKHC in Accra. For almost two years now there has unquestionably been a movement to the left domestically and this will continue but there is reason to doubt that this will have more than an indirect influence on Ghanaian external policies. It must be remembered however that Ghana is not repeat not non-aligned on questions of colonialism and it is by their actions on these questions that all other countries are judged by Nkrumah. Similarly he has identified Ghana and its policy with the “anti-colonial struggle” and he will inevitably see adverse reactions to his domestic measures by any country as a sign of hostility to the liberation and unification of Africa. If for example UK should find Ghanaian actions intolerably provocative and refuse the requested military mission or cancel the Queen’s visit Nkrumah would take it as proof of UK malevolence in Katanga. If USA should prove reluctant to proceed with the Volta River project Nkrumah’s suspicions of the West at large would seem to him so amply justified that we might expect to see the abandonment even of the cherished non-alignment.

Whatever we may think of the logic of this viewpoint we must recognize that it is firmly held and I think it sufficient to account for most of Nkrumah’s actions. This interpretation should not repeat not of course be taken as an attempt to explain away his impressionability which has been played upon during his Soviet tour and which is still being played upon by the extremists in his entourage. That is a real problem but Nkrumah’s preparedness to be impressed stems in large part from what he has seen of Soviet support for African Nationalism. To his mind it would seem to follow that if Soviet bloc acts correctly on that issue it is at least very likely to be right on other issues also. However on September 26 he stressed to UK High Commissioner his continuing confidence in the non-aligned approach. On that occasion he showed a healthier attitude to Soviet world than many here would have expected. At the same time he complained bitterly of recent criticisms of Ghana in UK press and has written a lengthy letter to Mr. Macmillan about UK-Ghana relations ending with a proposal (planted in his mind by UK High Commissioner) that Sandys might come to Accra to talk things over. This is the familiar pattern of hasty and ill-considered action followed by some attempt to make amends.

It is for us to demonstrate that Western countries can also understand African ideals just as we can understand the idea of non-alignment. I see no repeat no reason to lose hope about Ghana provided we are ready to support its legitimate aspirations to the best of our ability. For Canada this means continuing with the military training programme and with our other aid programmes and it means a very careful explanation of our reasons if we are unable to provide some of the assistance we are asked for. As an example I would hope that if Dobson declines the Volta River appointment it will be for technical or professional reasons and can be shown to have been so. Given that Canada’s role here is less crucial than that of the great powers our policy in Ghana and Africa has been constructive during the past increasingly perplexing months. For an aligned Western country Canada’s position in Ghana is unusually good and is firmly based on concrete actions. It would be worthwhile now to think of backing up deeds with words. I urge careful consideration of the desirability of a public statement, perhaps by Prime Minister himself, giving general support to the aims of pan-Africanism and the aspirations of African peoples. If you think this suggestion worth pursuing would you like a contribution from us?

We are very pleased with the decision contained in your reference telegram with movement of Canadian officers to Ghana for Canadian armed forces training team for the following reasons (1) General Otu has told us he wants Canadian officers to come forward as scheduled. Told that nineteen were due to arrive by December 31 he said “I need more.” (2) The Secretary to the Cabinet assured me on the weekend that Nkrumah wanted Canadian officers and asked us to proceed with our plans. (3) There is an obvious requirement now all the more pressing for Canadian assistance to Ghana armed forces.

In our immediately preceding telegram we have gone into the political background to Dr. Nkrumah’s decision to remove British officers. It seems now that his overriding desire to have the headquarters of African High Command in Accra overcame any fears he might have had that a Ghanaian led army could not repeat not be trusted to give him loyal service. He has in a sense put his African ambitions before his personal safety.

UK High Commissioner has been asked by Ghanaians to request British Government to approve in principle sending a military mission to Ghana. We have been told by UK mission that they have recommended approval of this request. General Otu speculated in our conversation that British mission would be a technical military mission with emphasis on officers in engineers and works, signals, medical, service corps and the like, numbering about sixty. It was clear, however, that he did not repeat not really know how many were required but recognized that Ghana forces would need all the help they could get from UK and Canada. British military experience in Ghana has until the last few days been a happy one and the departure of British officers from infantry battalions and training centres will probably be as hard on Ghanaian soldiers as on those leaving. At the moment British officers are somewhat unhappy not repeat not at the prospect of Ghanaians in command but because of the uncertainty of their own position.

We understand that General Alexander’s last interview with the President on the morning of September 25 was a highly emotional scene during which Alexander broke down. Nkrumah had asked him to return to Ghana to head the military mission saying that he needed Alexander’s help and advice. Perhaps this example of the President’s characteristic immaturity was too much to bear. It is a factor with which we will have to contend more in the future as our own involvement in Ghana develops.

[B.M.] WILLIAMS

590. DEA/12882-G-6-40

Ambassador in United Arab Republic to Secretary of State for External Affairs

Mr. Williams in his telegram 328 September 28 has raised the question of Canadian policy with regard to aid to members of the neutral bloc irrespective of the policies they follow. He has recommended that our aid to Ghana should continue in spite of accusations that Nkrumah is following a policy which is distasteful to the West.

I recognize that there is much to be said for ignoring the viciously anti-Western attitude of Ghana on almost every foreign issue, including those of no repeat no immediate interest to Ghana, and Nkrumah’s increasingly obnoxious internal policy, in the hope that continued aid to Ghana will eventually result in more moderate policies. But there are also strong arguments against continued aid.

First, with regard to non-alignment, it seems to me that we must make a clear distinction between colonial issues and other world problems. Until most remaining colonies are liquidated the West must accept the idea that the newly independent countries are going to be primarily anti-Western on the colonial issue. But it does not repeat not follow that they should adopt the Soviet line on other vital issues in the Soviet-Western struggle.

As far as Ghana is concerned Nkrumah at the Belgrade Conference was lined up with the Soviet Union on the issues of Germany, disarmament, nuclear testing and so on, about as closely as he could possibly be. Perhaps he has retreated slightly from that position since then but he did utilize the conference platform for purposes which were strictly non-aligned. Surely we can expect at least a modicum of neutrality on issues which do not repeat not affect the vital interests of non-aligned countries.

At any rate I would like to point to two strong considerations against continued aid to Ghana which have not repeat not been taken into consideration by Mr. Williams. The first is the effect on other reasonable, moderate and friendly African states of continued Western support for a country which has shown itself repressive in its internal affairs and pro-Soviet in its foreign policy.

It is difficult to get any firm information here about the attitude of Egyptians to recent developments in Ghana but there seems little doubt that UAR-Ghanaian relations are not repeat not entirely happy and that there is a good deal of suspicion about Nkrumah’s ambitions, especially in Africa. When I was in the Sudan, the Sudanese took many opportunities to indicate that their relations with Ghana were not repeat not very good and in fact they were highly scornful of Nkrumah and his claim to be the leader of Free Africa. They were, in addition, rather critical of the repressive measures within Ghana itself.

I wonder therefore if it would be wise for the Canadian Government to give public encouragement to Nkrumah when this might well react against our reputation elsewhere in Africa. You will recall, for example, that the Sudanese Foreign Minister made it quite plain to me that he found it very difficult to understand why we should give material and political support to Ghana simply because it was in the Commonwealth, although it followed policies harmful to the West. His conclusions of course was that we ought to support our friends in Africa.

The other consideration is the example of Soviet aid to the UAR and Guinea. Both countries rejected Western aid and accepted massive Soviet bloc military and economic support. Our information from Guinea is slight but indicates a certain revulsion by the Guineans against the Russians. As far as the UAR is concerned there has been a drift away from the Soviet bloc in recent months which, if we act discreetly, is likely to continue. While it may not repeat not mean a turning to the West, it does mean a realization by Nasser of what Soviet aid involves, followed by a desire to remain genuinely neutral.

I submit therefore, that there is a good deal to be said for not repeat not giving aid to a country determined to take an anti-Western line. If they accept Soviet aid I do not repeat not think this is necessarily going to be disastrous for the West, and it may be that the experience of Soviet aid will be a salutary one for African countries.

The question of support for the Nkrumah brand of pan-Africanism is another matter, but again I think we should go carefully. There seem to be a good many African politicians who favour African unity but who oppose Nkrumah’s recipes. I see no repeat no reason why we should appear to be taking sides with him, particularly if, as his present behaviour seems to indicate, an Africa united according to his ideas would be anti-Western and pro-Soviet in its outlook. If, as I suppose, it is important that we safeguard our position in Ghana and preserve goodwill there, the best policy for the present may be to say little about African unity, except perhaps in the most general terms, and to let the material aid we give, and our voting record in the UN speak for themselves.

[R.A.D.] FORD

591. DEA/10283-A-3-40

Memorandum from Under-Secretary of State for External Affairs to Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], December 5, 1961

Military Training Assistance Agreement with Ghana

You will recall that on June 1, 1961, the Cabinet approved the recommendation of the Minister of National Defence to provide on certain stipulated conditions Canadian assistance in the training of the Officer Corps and technicians of the Ghanaian Armed Forces. These conditions were agreed to by the Ghanaian authorities and embodied in a draft agreement prepared after consultations between the Department of National Defence and ourselves. Our mission in Ghana has discussed this draft agreement with the Government of Ghana and its terms have now been approved, with minor amendments, both by the Ghanaians and by ourselves. A copy of the final text is attached.

As you know, the members of the Canadian team moved to Ghana in September 1961, prior to the conclusion of an agreement, since it appeared that the negotiations might require a certain length of time. The proposed agreement has been made retroactive to September 1, 1961.

Both the Department of National Defence and ourselves are satisfied that the attached text conforms to the stipulations of June 1, 1961 and that it would properly safeguard the rights and status of the members of the team. We are informed that it was brought to the attention of the Minister of National Defence and was approved by him. We attach for your signature, if you agree, a Submission to Council recommending that the High Commissioner for Canada in Ghana be authorized to sign the attached agreement.

We have been informed of President Nkrumah’s request to Prime Minister for assistance in recruiting Canadian to head Volta River Authority. We urge every effort be made to find suitable candidates for this position and suggest for your consideration that in view of importance of post it might be desirable if Canada were to offer supplement to salary offered should this be necessary in order to attract an individual of high enough calibre. The Ghanaians have not repeat not asked us to do so.

According to Sir Robert Jackson agreement on Volta project in Washington is now “virtually in bag.” We have no repeat no information to contradict this.

You will no repeat no doubt already have considered benefits to Canada if we can select suitable person. We understand President Nkrumah has not repeat not approached any other country directly. In view of our inability to participate financially in Volta project you will agree this is good opportunity for us to demonstrate support.

It was emphasized to us by Sir Robert that as President is leaving in about three weeks for an extended tour of USSR it is important that we give preliminary reaction before his departure.

593. DEA/12881-7-40

Prime Minister to Prime Minister of Ghana

Ottawa, July 22, 1961

Dear Mr. President,You will recall that in my letter of June 20† I said that I would immediately ascertain whether there was available a candidate with the requisite qualifications for the position of Chief Executive of the Volta River Authority. It gives me great pleasure to put forward for your consideration the name of Mr. Frank J. Dobson who is at present construction manager of the Lakeview Generating Station of the Hydro Electric Power Commission of Ontario, which I understand is the largest thermal generating plant in the Commonwealth.Mr. Dobson is the outstanding construction and hydraulic engineer of the Hydro Electric Power Commission of Ontario. He has had much experience in this field and was recently Project Manager for the construction of the huge Sir Adam Beck Number 2 hydro-electric generating station at Niagara Falls.Mr. Dobson is forty-four years old which is about the age which you suggested in your letter. Furthermore, I am sure that you will find that he possesses all the other qualifications which are necessary for this important and challenging appointment.I understand that your High Commissioner here has been in touch with Mr. Dobson and you will no doubt have received a full report from him.I am proud that Canada has been able to participate in this undertaking. Our cooperation in this venture will serve to strengthen and confirm the relations between our two countries.

With kindest regards,I am,Yours sincerely,JOHN G. DIEFENBAKER

594. DEA/12881-7-40

Prime Minister of Ghana to Prime Minister

Accra, October 9, 1961

My dear Prime Minister,I should like to take this opportunity of thanking you for your kindness in suggesting Mr. F.J. Dobson for the appointment of Chief Executive of the Volta River Authority.I am very pleased to be able to tell you that Mr. Dobson has created a very favourable impression on me and I have therefore appointed him as Chief Executive, with effect from the 1st November, 1961.I hope that this appointment will further strengthen the bonds between our two countries.

With kindest personal regards,Yours very sincerely,KWAME NKRUMAH

Section E - British Giana

Sub-section I

Visit of Prime Minister of British Guiana to Ottawa, October 18-19, 1961

595. DEA/11913-40

Memorandum from Under-Secretary of State for External Affairs to Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], September 8, 1961

Invitation to Dr. Cheddi Jagan to Visit Canada

In my memorandum to you, dated August 30, on a possible visit to the United States by Dr. Cheddi Jagan, Premier of British Guiana, I linked the suggestion that you might wish to consider inviting him to Ottawa with a possible decision by Canada to participate in an aid programme for former British territories in the Caribbean. Since that memorandum, with which you expressed agreement, there have been developments which lead me to conclude now that an invitation to Dr. Jagan to visit Ottawa soon would be politically advisable in itself, quite apart from any aid programme for former British territories in the Caribbean.On September 7, I and officers of the Department met with Mr. N.V. Davis, President of Aluminum Limited, and three of his advisers to discuss, at their request, the situation in British Guiana now that Dr. Jagan is once more in power there. The principal spokesman for the Aluminum Company was Mr. James Campbell, Managing Director of Alcan’s wholly-owned subsidiary in British Guiana, who has had talks with Dr. Jagan since the elections. (Mr. Campbell recently participated with Dr. Jagan in a CBC televised programme which is to be presented on Close-up next Tuesday evening at 10 p.m., September 12.)Dr. Jagan is an admirer of Premier Castro, and there have been reports that he may seek closer ties and assistance from the Communist bloc once British Guiana has achieved full independence. He is not interested in joining the Federation of the West Indies. There have been indications that Dr. Jagan is not fully committed to any bloc and might well welcome Canadian advice and assistance, perhaps in the form of an adviser on planning, with his plans for the development of his country. In the recent elections, although he won 20 of the 35 seats in the Legislative Assembly, his share of the votes was only 43%. Since the election he has spoken of adopting a policy of non-alignment and of seeking aid wherever he can find it. He has also spoken of hastening the date of British Guiana’s independence. There is, I think, an opportunity for Canada to exert a moderating influence on Dr. Jagan and a visit by him to Ottawa would be a first step in that direction. The representatives of the Aluminum Company were convinced that a tangible proof of the Canadian Government’s sympathetic interest in Dr. Jagan’s economic planning and development problems would be welcomed by him, particularly if it were given in the near future.I understand that Dr. Jagan is to be in Washington from October 10 to October 12 and has an engagement in New York on October 13. If you agree, I suggest it would be wise to invite him and perhaps his Minister of Finance, through the Colonial Office, to come to Ottawa for a few days at the end of his visit to the United States. The invitation might be couched in terms which would make it clear that you would welcome the opportunity of meeting a Commonwealth colleague and would be interested to hear from him about the problems of his country, without making any commitments, or holding out any prospects of possible Canadian aid to British Guiana.

N.A. R[OBERTSON]

596. DEA/11913-40

Memorandum from Commissioner to the West Indies to Commonwealth Division

CONFIDENTIAL [Ottawa], September 8, 1961

Aid for British Guiana

At the meeting which the officers of the Aluminum Company of Canada held with the Under Secretary on the 7th of September, it was suggested that (1) it is particularly important that if Canada is going to give any aid to British Guiana, this should be done at once, and that it should take the form as far as possible of providing advisers in the field of economics and finance; (2) that Dr. Jagan, the newly elected Premier of British Guiana, who is to make an official visit to the United States from the 10th to the 12th of October, should be invited to come to Canada at that time; (3) that Canada should establish Canadian Government representation in British Guiana in order to deal direct with the Government of British Guiana, that is expected will achieve its independence in the relatively near future.

The proposals put forward by the Aluminum Company representatives seem to me to be sound. It is recognized that it will be difficult, in the extreme, to find a suitable person who could give guidance to British Guiana Government in the economic and financial field, and to do it in such a way as to influence that Government to adopt policies that are favourable to the West. Nevertheless, it is important in my view, that an offer of help along these lines should be made. As part of the general plan, Dr. Jagan, accompanied by his wife, should be invited to visit Canada. This would suggest to Jagan that Canada is anxious to help and that his Commonwealth association is something that is of value to him. Although Jagan is generally believed to be closely attracted to the Communistic philosophy, he is not “irretrievably lost,” and if he is given help and encouragement by “the West,” it is possible B.G. can be kept in the Western camp.

I would suggest that the most satisfactory way of carrying out these objectives would be to send an invitation to Dr. Jagan and his wife through the Colonial Office, and that I should be instructed that as soon as possible after my return to Port-of-Spain, I should go to British Guiana to reinforce the invitation and to explain to Dr. Jagan that we are anxious to learn of his problems and to help, but that, at the same time, to point out that we have not unlimited funds. If, in the meantime, the question of developing a program along the Colombo Plan lines for the British Caribbean area can be resolved, it would, of course, be most appropriate to advise Dr. Jagan during his visit, of what we have in mind. (However, if we do find ourselves in the position of discussing this subject with Dr. Jagan, it is most important that we should first inform the Federal Government of The West Indies of what we are planning.)

As far as the question of opening a separate office in British Guiana is concerned, I believe that this would be a useful additional support to the objective of convincing Jagan that he is welcomed as a future partner in the Commonwealth and that we are generally concerned with developments in B.G. It must be remembered that so far we have only been able to help British Guiana under the Aid Program to a very minor extent, and, in some degree, Dr. Jagan and his colleagues are under the impression that we have not helped British Guiana significantly because they have failed to join the Federation of The West Indies. In view of the Canadian investment in the area, and our long trading association I think it is important that we do what we can to remove this impression by taking concrete steps along the lines indicated above. It would be wrong, however, to imagine that a representative of the Canadian Government established in the area could exercise direct influence on Jagan’s policy-making; it is more probable that influence could be more effectively brought to bear by a suitable non-Government adviser or advisers attached to the British Guiana Government under the Commonwealth Aid Plan.

R.G.C. SMITH

597. DEA/11913-40

Memorandum from Special Assistant to Secretary of State for External Affairs to Special Assistant, Office of Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], September 12, 1961

For Mr. Campbell,The Prime Minister said that he would not object to an invitation being extended by Mr. Green to Dr. Jagan although he had strong doubts as to the likelihood of such a visit producing beneficial results. He said that if an invitation were extended, he would be prepared to receive Dr. Jagan in his office but would not be able to undertake any other engagements such as arrival and departure ceremonies, or hospitality. I understood him to say that he would leave such engagements to Mr. Green as host.

H.B. R[OBINSON]

598. DEA/11913-40

Memorandum from Special Assistant, Office of Secretary of State for External Affairs, to Under-Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], September 13, 1961Reference: Memorandum for the Minister dated September 8, 1961.

Invitation to Dr. Cheddi Jagan to Visit Canada

Having noted the Prime Minister’s reaction reflected in Mr. Robinson’s note dated September 12, copy attached, the Minister decided that we should proceed with arrangements to have an invitation extended to Dr. Jagan to visit Ottawa. His decision was prompted mainly by the direct interest of the Aluminum Company in preserving good Canadian-British Guianian relations, but also by the opportunity such a visit would afford to exert a moderating influence on Dr. Jagan’s policies.

ROSS CAMPBELL

599. DEA/11913-40

Commissioner to the West Indies to Under-Secretary of State for External Affairs

LETTER NO. 300 Port of Spain, October 11, 1961CONFIDENTIAL

Visit of Dr. Jagan – Possible Topics of Discussion

As we hope to have a bag going off tomorrow, I will give you a very brief indication of what Dr. Jagan may talk about when he is in Canada. I shall be having lunch with him tomorrow and may be able to add to this information.

It would appear as if Dr. Jagan is regarding his speech to the Royal Ontario Museum as being of some considerable importance. This may be because he has no knowledge as yet concerning what speeches he may be expected to make in Ottawa. According to Searwar, who seems to be Jagan’s principal speech writer (evidently always subsequently vetted by Low-a-chee and Kelshall) the speech deals with the concern of British Guiana over the sugar preference in the face of declining Canadian exports to British Guiana. He will say that, particularly in view of the development of the European Common Market, it is in the interest of both countries to increase their trade. He will also make a plea, I understand, for help and a better interchange of cultural activities. He seems to be very much interested in the development of the theatre in British Guiana and may want to explore the possibilities of Canadian groups visiting British Guiana, particularly in the remoter areas.

He is also interested in the establishment of a Liberal Arts College in British Guiana, and he may want to sound us out for help on this proposal. In this connection, Searwar tells me that Jagan received a mysterious telegram from a Professor John Paul of Western University advising that he would be willing to establish a university in Georgetown free of charge. This message seems to have dropped out of the blue without any previous approach by Jagan to any Canadian university. Searwar is making necessary inquiries and he has asked that we should not raise the question of this mysterious offer with Jagan unless Jagan himself asks us about it, or to look into it for him.

Jagan’s principal reason for going to Washington is to seek help from the United States. An aid mission has been there i.e., British Guiana, and has just returned to Washington. According to Searwar, the aid mission may not have been too impressed with Jagan’s intentions and may not be too sympathetic towards giving help. There is no doubt whatsoever that Jagan will want to question us about what we are likely to do in the way of aid to British Guiana. In my letter No. 124 of October 4 to External Aid Office with a copy to you,† I indicated some of the ways in which I thought we might usefully help British Guiana. In particular I referred to the possible establishment of an economic planning unit and the almost certain need for outside help to have this set up. It would seem to me that if we could offer to help out in the setting up of this economic planning unit, this would be most desirable from every point of view.

I understand also that Hubbard is very much interested in the establishment of a Biological Institute for savannah research, which Searwar tells me McGill University is setting up. This is the first I have heard of this proposal, but it may be that Jagan or Hubbard will mention this to you. Hubbard is also evidently discussing the possibility of developing hydro power in British Guiana with some company in Ontario that is said to be offering to help in the financing of it.

R.G.C. SMITH

600. DEA/11913-40

Commissioner to the West Indies to Under-Secretary of State for External Affairs

LETTER NO. 301 Port of Spain, October 11, 1961CONFIDENTIAL

DR. Jagan

We have already sent you through the mail some factual details dealing with Dr. Jagan’s career. This will attempt to give you a more personal insight into Dr. Jagan and to discuss some of the forces that are shaping his actions at the present time.

Dr. Jagan is a most likeable and charming person to meet and he may be expected to put British Guiana’s case for aid and to describe his plans in a most persuasive and disarming manner. Nevertheless he is quite capable of saying one thing during an official or informal discussion and to then harangue the ignorant mob in a most unedifying and truculent manner, giving as an excuse that politically he is bound to act in such a way, “… but, of course, he really does not believe in all that he says.” This refusal or pretended refusal to link cause with effect is a reflection of his weakness (although regrettably an all too common West Indian habit) and his inability to take very much positive action. He would like to pose to his public as a revolutionary, but he probably lacks the ability and possibly the courage to act as a full revolutionary “à la Castro.”

He is, in fact, a dreamer rather than a “doer.” He has shown no talent for administration and not much for positive planning during his previous term of office, and his truculence and failure to produce sensible economic planning has almost certainly prejudiced his chances of securing greater aid from abroad. He has shown no ability to attract good men around him and his former colleagues in his “Cabinet” have been undistinguished “yes men” with no executive or administrative ability. His wife was undoubtedly the best “Minister” he had, and is generally thought to have been the driving force behind the political organization of his party.

Jagan’s enemies accuse both him and his wife of being communists. He may have been a member of the party at one time and his wife more probably was and may be still. He has called Castro one of the greatest liberators of all times. Nevertheless, he has never admitted to being a Communist and if he can obtain support, financial and advisory, from the West, he may well be prevented from lining up with the Communist bloc after he achieves full independence. The fact is he has little understanding of economics, but he is easily led by Marxist slogans and bulletins which appear to be plausible and beneficial to a backward and undeveloped country that has been almost exclusively controlled in the past by “big business.” Jagan’s answer to those who accuse him of being a Communist is that he is not, but that he is a dedicated believer in Socialism as a means of improving the lot of the common man. “I am a Marxist Socialist … Eventually I want British Guiana to assume a neutralist role – like that of Ghana and India,” he is reported to have said recently in London. His wife is also claimed to have said that “Cheddi will never be satisfied until the British are driven out of the colony. He has no use for half-measures such as joining the West Indies Federation. He wants British Guiana to be free.”

Perhaps Jagan’s principal bête noire is Booker’s Bros., the British company that controls the majority of the sugar production in British Guiana and many other enterprises in the country. While in the past it undoubtedly operated in a high-handed and unsympathetic manner in keeping with the norms of the time, it has been following a most paternal and socially responsible course in recent years. Sugar production in British Guiana is a highly technical, difficult and expensive operation requiring central control, large capital investment, and research. (It is subject to floods and drought, must be protected from the sea by an elaborate system of dikes, and nourished by irrigation and drainage works.) Booker’s research has increased yields enormously. Despite their technical successes and their recent good efforts in the labour relations field, and because of Jagan’s early memories, the inequities of the past cannot be entirely forgiven by the activities of the present. Nevertheless, Jagan seems to have been impressed by Booker’s efforts on behalf of British Guiana generally, and at the moment his relations with them appear to be as good as they have ever been.

Jagan’s relations with Demerara Bauxite, a subsidiary of the Aluminum Company of Canada, have been reasonably good. Undoubtedly credit for this is due to the excellent public relations policies adopted by this Canadian company. It is still big business, however, and is therefore subject to attack from some of Jagan’s less responsible supporters.

Since Jagan’s election to the Premiership of a government that has almost complete control of its internal affairs, he has been a model of restraint and responsible head of government. His new Cabinet seems to be a considerable improvement over the last, although the absence of Mrs. Jagan seems to be a loss from the purely administrative point of view. (It may be that Mrs. Jagan, who is still the Secretary of the party, is being kept to organize and run the party daily paper which is about to be launched with its own printing presses.)

Jagan’s choice of Dr. Jacob as Minister of Finance is unfortunate as he has neither the training nor ability to handle that seemingly key position. He is also said to be an extreme left-wing socialist. However, it is suggested that with Jagan in charge of Development and Planning, the Minister of Finance is simply an administrative minister. The new Minister of Trade and Industry, Senator (nominated, not elected) Henry Jocelyn Hubbard, on the other hand, is a conservative, orthodox business man. He is close to Jagan, having helped him to re-enter politics after the constitution was suspended in 1953. Unfortunately, his immediate entourage consists of Jack Kelshall, a Trinidadian solicitor who has “advance” socialist ideas and may be a Communist, and C.C. Low-a-chee, his Permanent Secretary. Low-a-chee has been with Jagan for some time and is suspected of being a Communist. Of the two, Kelshall is probably more extreme and outspoken. He appears to be very close to Jagan and to exercise great influence over him. The influence of these two is serious and will tend to drive Jagan back to his “1953 personality” and away from the more moderate approach he has been developing recently.

R.G.C. SMITH

601. DEA/11913-40

Commissioner to the West Indies to Secretary of State for External Affairs

From conversation with Dr. Jagan and party at lunch clear he will principally talk aid in Ottawa. Have warned him that we are not repeat not able to offer much owing to budget position and allocation being nearly exhausted. I hope he understands our limited abilities to help now. Believe he will want to explore (i) question of sugar preferences (ii) aid to hydro electric development and rural electrification with Therman plants (iii) help in survey on timber exploitation (iv) medium term credit for agriculture equipment generally. Hubbard is in touch with (Canadian?) construction company regarding quota for (group corrupt) development including financing.

Believe Jagan will want to discuss feasibility of low interest rate loan, his panacea for all ills. Has twenty million dollar West Indies grant (group corrupt) spread over five years beginning 1960 and a treasury loan at forty million dollars for same period which he sarcastically criticizes for seven percent rate. However am sure he would welcome technical assistance for proposed economic plan unit.

Searwar asked if objection to Saskatchewan visit was official Canadian Government or British Government view. I said I knew nothing of any objections.

602. DEA/11913-40

Memorandum by Special Assistant to Secretary of State for External Affairs

The record of this conversation is being drafted by Mr. Duder, the Head of Commonwealth Division. The conversation lasted for approximately 50 minutes, considerably longer than scheduled. The atmosphere was cool at first and never became warm although the dialogue was somewhat more fluent towards the end. Dr. Jagan was accompanied by Senator Hubbard who obviously enjoyed his confidence. The first ten minutes were taken up with a brief exposé by Dr. Jagan of the basic causes for the economic and social difficulties facing British Guiana (geography, population, etc.). I thought that Dr. Jagan was in this way laying a foundation for the possible discussion of Canadian aid but, before he was able to develop the theme, the Prime Minister broke in to enquire about his attitude towards the Commonwealth. Jagan said at once that he wanted to stay in the Commonwealth although he was not sure how the United Kingdom’s position in the Commonwealth would be affected by developments with respect to the Common Market. The Prime Minister questioned him quite closely but Jagan said again that he would prefer to stay in. The Prime Minister then said that, now that it had been established in the case of South Africa that membership in the Commonwealth was not automatic, the prospect of a Communist state entering the Commonwealth was extremely remote. Although the Prime Minister said to Jagan that he was not of course referring to British Guiana, Jagan clearly got the message and spent a good deal of the remaining time in attempting to refute stories of his alleged Communist beliefs. He said among other things that he believed it should be possible, and he intended to try, to separate the political from the economic organization of the country. He wanted to continue the Parliamentary system on democratic lines. At the same time, he felt that a country with British Guiana’s problems and needs could only progress on a basis of state planning. For ten or fifteen years he had spoken of the need for planning, a word which was taken ten years ago as being synonymous with Communism. The Prime Minister assured Jagan that he understood the need for planning – after all, he had come into office on the promise of planning the future of Northern Canada. It was not this which concerned Mr. Diefenbaker. He implied that British Guiana might adopt a Castro model and this stung Jagan into asking the Prime Minister for an explanation of the “rules” so that British Guiana might understand how it should “behave” in order to live harmoniously with the United States and Canada. He noted that Ghana – he said he did not agree with what Mr. Nkrumah was doing – and Pakistan – where there was also a dictatorship – were both within the Commonwealth. Moreover, the United States has had friendly relations with some of the worst Latin American dictators. Jagan clearly was intending to go on and ask what it was about Castro’s system which made him so unacceptable when other dictators were within the group to which the United States and Canada belonged. The Prime Minister volunteered the answer when he said that there was no country in the Western hemisphere which was more of a puppet of the Soviet Union than Cuba. The conversation ended inconclusively with Senator Hubbard intervening to assure the Prime Minister that the British Guiana Government was determined to respect the place of the opposition in the political system.Later in the day, the Prime Minister told me that, while he was impressed by Jagan’s personality, he thought from his reactions, especially in relation to Cuba, that Jagan was a Communist. I said that, however that might be, Jagan was obviously a man with whom we would have to deal in the future and that a sympathetic attitude now and an attempt to give aid within our capacity might do something to help prevent Jagan from drifting into the Soviet orbit. This was a time of transition for Jagan and the attitude of Governments such as the Canadian Government might have a considerable influence on Jagan’s policies in the future. The Prime Minister did not seem persuaded by this remarks.I should add that the Prime Minister at no time gave Jagan the slightest reason for expecting that the Government would give any special consideration to his request for aid. His remark at the end of the conversation to Jagan was: “I hope your experiment succeeds.”I do not know what impression Jagan carried away from this conversation but I think, from seeing his reactions to some of the Prime Minister’s remarks, that he was probably puzzled and disappointed. One thing is certain, however; he was left in no doubt that Canada would oppose membership in the Commonwealth for British Guiana if British Guiana seemed to the Canadian Government to be adopting Communist policies (however they might be defined). After the conversation the Prime Minister told me that he had deliberately taken this line with Jagan so that there would be no misunderstanding in future.

H.B. R[OBINSON]

603. DEA/11913-40

Secretary of State for External Affairs to Ambassador in United States

Dr. Jagan saw his visit to Ottawa as an attempt to win Canadian goodwill for his country, to make friends in another Commonwealth country, to explain British Guiana’s economic and political problems, to demonstrate British Guiana’s position as a bridge between North and South America and to ask for Canadian help in solving the problems of his under-developed area. In our view his visit may be regarded as having served a useful purpose. His engaging personality generally made a favourable impression on Canadian ministers and senior officials with whom he had long and serious discussions. He left with a good picture of Canada-British Guianese trade and aid problems and political aspects of British Guiana. He received constant radio and TV coverage during his visit.

Jagan repeatedly stressed that he was a socialist devoted to parliamentary democracy, economic planning and pragmatism. He intends to strive urgently for full political and economic independence within the Commonwealth, although on this last point he expressed some concern about the possibly detrimental effects on British Guiana’s economy of Britain’s entry into the European Common Market.

Jagan and his government are obviously men in a hurry. They want a great deal of money quickly (mention was made of even as much as 350 or 400 million dollars over a ten-year period) for the rapid industrialization of British Guiana and they would like to get it by long-term, low-interest loans with, if possible, a moratorium on repayment of something like 8-10 years and with no political or economic strings attached. British Guiana has a grave and growing unemployment problem (which Jagan, speaking to the press on his arrival, blamed on colonialism), great land hunger and pressing needs for electrification, highways, a more mixed economy (sugar and bauxite now account for 80% of their economy) and – to quote Dr. Jagan – the “busting open” of the hinterland. Jagan and his group would have liked a promise of a large Canadian loan at once and it was not easy to bring their sights down to the realities of our situation in the aid field. Jagan made it pretty clear on several occasions that he was not immune to the attractions of Soviet loans which bear a low interest rate and are, in his view, mainly given for rapid industrialization so that the results can be quickly seen and felt by a country’s people. He clearly felt that he would have to bring some prize home soon. It should be added, however, that on no occasion did he resort to crude threats or demagogic oratory. Canadian ministers had several opportunities to express their opinions about the dangers which would be involved for British Guiana if that country became too dependent on Soviet help.

Canadian reaction to Dr. Jagan’s presentation has been sympathetic and we believe that Jagan has appreciated this. We have, however, been somewhat nonplussed by the size and urgency of his requests and the difficulty of getting a clear picture of his financial figuring. We have promised to see what can be done but we have left Dr. Jagan with no grounds for false optimism.

Washington may be interested to know that no particularly unkind remarks were made about the USA at any point. One member of the party was somewhat critical of USA aid offers on the ground that they tended to be confined to social welfare projects and did not include projects which would increase productivity.

Sub-section II

Aid to British Guiana

604. DEA/12882-B-44-40

Memorandum from Assistant Under-Secretary of State for External Affairs to Director-General, External Aid Office

CONFIDENTIAL [Ottawa], November 24, 1961

Aid Survey Mission to British Guiana

Mr. Armstrong of the U.S.A. Embassy telephoned me this morning concerning a delayed message received at the Embassy about a proposal for a multilateral aid mission to British Guiana. Apparently the U.S.A. administration is sending Mr. Robert Nathan (an economic consultant who has had a considerable reputation as a New Deal economist) to Georgetown this weekend in order to discuss the proposal with Dr. Jagan before the latter’s departure for London and Tanganyika in the next few days. The idea which Nathan is expected to try out on Dr. Jagan would involve an early visit from an expert aid mission consisting of representatives from the Economic Commission for Latin-America, the Inter-American Development Bank, the International Bank, Puerto Rico, the United Kingdom, and Canada. Surprisingly, Armstrong made no mention of the Caribbean Commission as a possible member. This mission would be under the chairmanship of a U.S.A. representative with broad experience in the problems of economic development. (Mr. Armstrong was not sure whether the chairman would be Nathan or someone else.)

The purpose of Mr. Armstrong’s call was to find out urgently (preferably before the end of today) whether Canada would be prepared to take part in the work of such a technical mission. According to Mr. Armstrong, it would be made clear that participation did not involve any commitment regarding future assistance.

I told Mr. Armstrong immediately that there was no chance of getting a definite response from us today, or even during the first few days of next week, since the proposal had implications which we would have to consider carefully and would have to put to Ministers (several of whom would not be available during the next few days).

I saw no reason why the Embassy could not on its own responsibility suggest to Washington that the possibility of inviting Canada to join such a mission could be examined by Nathan in his talks with the authorities in British Guiana if that seemed desirable. It could not, however, be assumed that Canada would necessarily be able to take part if an invitation were to be issued.

In accordance with our telephone conversation it is my understanding that you will be consulting the members of the Aid Board to whom I am sending copies of this brief note.

My own feeling is that we should get in touch very soon with the authorities in British Guiana about our future aid prospects, but I am doubtful that we should necessarily do this under U.S.A. auspices. We should certainly consult closely with the U.S.A., but I am not certain that we should tie ourselves in to an aid mission under U.S.A. chairmanship. Some of the other prospective participants (such as ECLA) may have a similar difficulty with the proposal.

I should think that after you have checked with the members of the Aid Board, we might attempt to put an agreed view to Ministers together with our own proposals for aiding British Guiana over the next year or so. In that connection we might revive the suggestion for a “Colombo Plan” arrangement (including Asian and African representatives) as a substitute for, or supplement to, the U.S.A. idea of an aid mission. If we do not put some suggestions in play fairly soon, I am afraid that we may be confronted with some pretty half-baked American “organizational” proposals that may offend the British Guianese and might make it more difficult for us even to carry out our own aid programme if we appear to have been identified with the U.S.A. in any misconceived exercise.

A.E. R[ITCHIE]

605. DEA/12882-B-44-40

Memorandum from Director-General, External Aid Office, to Assistant Under-Secretary of State for External Affairs

CONFIDENTIAL Ottawa, November 28, 1961

Your memorandum of November 24 on the proposed Aid Survey Mission to British Guiana reached me only last evening. In our telephone conversation of last Friday I made the following points:

I agree entirely with the statement you made to Mr. Armstrong.

While some of the reasons which influenced our decision to participate in the Aid Mission to the West Indies are also valid in the case of an Aid Mission to British Guiana, they are perhaps less compelling because of the very modest scale of our present assistance to British Guiana, and it would be awkward if we played a part in a mission such as proposed by the United States and then found ourselves unable to increase the Canadian participation beyond the present amount of $50,000.

Before any memorandum goes forward to a Minister or Ministers this whole question should be considered by the External Aid Board and we should in particular obtain the reactions of Mr. Plumptre, since the most important consideration from the Canadian standpoint will be the resulting pressure for increased financial assistance from Canada.

Any memorandum to Cabinet would have to describe the use which has been made of the current $50,000 appropriation for British Guiana, and almost none of this money has yet been spent. When Dr. Jagan and his party were here they promised that immediately upon their return they would submit proposals for the effective use of these available funds. No word has since been received from them, and I propose writing to the Secretary of the Cabinet who accompanied Dr. Jagan, to remind him of the undertaking given at the time of his visit. While it is frequently easier to find effective uses for a million or more dollars than for a small amount like $50,000 (for example, none of the projects mentioned by Dr. Jagan could possibly be undertaken with only $50,000 at our disposal), the fact remains that some members of Cabinet might question a suggestion for an increased Canadian aid effort when money already available has not been spent.I am not sure that I entirely share the view expressed in the final sentence of your memorandum. So long as we are not actively associated with the American plan any deficiencies in it could hardly reflect on Canada. In fact, if it should prove to be “half baked” or offensive, it might well make any Canadian plan much more acceptable in the eyes of British Guiana. However, I do agree entirely that we should put forward as early as we can possible forms of Canadian assistance in varying amounts. To the extent that time has permitted we have been examining this question, and some alternatives have emerged from our study of the problem. Mr. McGill of this Office will draft a general memorandum which can be circulated to Board members for consideration, after which a meeting might be held to consider it. Since I will be absent from Ottawa next Monday and Tuesday, December 4 and 5, the earliest I could participate in a meeting would be late on December 6, or some time on December 7. I would therefore propose a meeting of the Board at 4 P.M. on December 6, or either 10.30 A.M. or 3 P.M. on December 7. On the other hand, if earlier consideration of the matter is considered desirable, a meeting could, of course, be held in my absence.Concerning your footnote on page 1 of your memorandum, I think that the Caribbean Commission has been omitted because, as I understand it, the Commission is only a consultative body and might not be in a position to make any positive contribution. I remember Dr. Jagan describing it as a “forum of discussion” and saying that even if it developed a plan for foreign aid to the Caribbean area, any detailed arrangements within such a plan would still be carried out on a bilateral basis.As you know, the Americans are aware that some thought has been given in Canadian circles to a Colombo Plan type of operation for the Caribbean, and I am wondering whether their sudden burst of activity may have been prompted by a desire to seize the initiative in any such multilateral programme of aid, or whether the proposal stems from a genuine concern about Dr. Jagan’s intentions.

H.O. MORAN

606. DEA/12882-B-44-40

Memorandum from Special Assistant, Office of Secretary of State for External Affairs, to External Aid Office

CONFIDENTIAL [Ottawa], February 8, 1962

Reference: Memorandum to Cabinet dated February 5, 1962.†

Aid to British Guiana and British Honduras

The Cabinet today considered and approved the recommendations contained in the memorandum under reference, as follows:

to allocate the sum of $85,000 for the provision of the described equipment required by British Honduras and British Guiana,to pay the shipping costs to the extent that such costs cannot be financed by these territories.

In communicating this decision, Mr. Bryce said that Ministers had attached particular significance to the words “to the extent that such costs cannot be financed by these territories.” It was their view that this provision should be strictly applied as they are not anxious to have aid monies allocated to shipping costs.

ROSS CAMPBELL

Part 4

Commonwealth African Assistance Programme

607. DEA/12882-2-40

Memorandum from Head, Economic (1) Division, to Assistant Under-Secretary of State for External Affairs

CONFIDENTIAL [Ottawa], February 14, 1961

SCAAP

Officials from the Departments of External Affairs, Finance, Trade & Commerce, the Bank of Canada and the External Aid Office met in Mr. Martin’s office again last week to discuss the general approach that might be adopted under the Special Commonwealth African Aid Programme. The External Aid Office had prepared two excellent papers (attached).

The first paper on general principles was intended to guide our Missions in informing prospective recipient governments of the general principles which apply to all Canadian aid programmes. The purpose was to have these countries understand the terms under which Canadian aid is granted so that misunderstandings might not arise in the future.

The second paper outlines the general approach the External Aid Office would like to follow in planning the African Aid Programme and especially its technical assistance aspects. I think you will be interested in glancing over the conclusions and summary (from page 10 to the end).

The External Aid Office are going to incorporate some suggestions put forward at the meeting but these will not affect the general approach which is to blur the distinction between capital and technical assistance which has been a feature of our Colombo Plan programme.

Mr. Sharpe and the other departmental representatives at the meeting were impressed at the progress which the External Aid Office is making in planning for this programme. The intention is to refer these papers to Accra and Lagos for comment and then to prepare appropriate submissions to the External Aid Board (and Cabinet where necessary) so as to obtain policy guidance.

O.G. STONER

[ENCLOSURE 1]

Memorandum

Aid to Africa – General Principles

There are a certain number of general principles which apply to all Canadian aid programmes, but it is important that these principles should be clearly understood by the countries to which we are giving aid; otherwise serious misunderstandings might arise in the future. The purpose of this paper is to outline these principles and to explain them briefly.

Canada does not finance projects unless they have a high Canadian content, and preference is given to projects with no foreign content. This policy is essential if public support of our aid programmes is to be maintained. Even minor purchases abroad have been the objects of complaint to Ministers. This policy means that there are a number of projects which we cannot undertake. Mention should also be made of the fact that certain projects are not undertaken because the prices of the Canadian produced goods are considerably higher than world market prices. (A study of Canadian availabilities in both the fields of technical and capital assistance are currently being carried out and will be made available to all missions.)

Canada does not pay ocean freight and inland freight charges outside Canada.This principle follows from the first one since Canada does not own a merchant fleet. Another consideration is that if a country is prepared to pay the freight charges, it gives an indication that it considers the project to be sufficiently important to invest some of its resources in it. Finally, it is considered that the payment of freight charges would not constitute the best use of funds in terms of the objectives of Canadian aid programmes.

Canada does not pay for the local costs of projects (except where counterpart funds are available).This principle also follows from the first one. Furthermore, the purpose of Canadian aid is to provide either goods or services which would not otherwise be available to the countries to which assistance is given. The payment of local costs by the receiving governments is also a good indication that they attach importance to the project being financed.

Canada requires counterpart funds to be established when its aid takes the form of commodities.Commodity aid is unlikely to be provided in the foreseeable future. However, a general paper on counterpart funds is being prepared and will be circulated to all Missions.

Goods provided by Canada are exempt from customs duties and other taxes imposed by the countries receiving aid.The payment by Canada of customs duties and other taxes on goods which it is providing on a grant basis is obviously undesirable.

Major projects are subject to separate inter-governmental agreements between Canada and the countries in which the projects are located.A master copy of the agreement will be circulated to all missions.

To be considered, each project must be the object of an official request by the country receiving assistance.Canadian aid is given on a government-to-government basis. Requests for assistance received from provincial governments, from departments of government which have not been authorized to act officially in these matters, or from private organizations cannot therefore be considered unless they are transmitted and approved officially by the central government, i.e., the only one with which Canada maintains formal relations.

Requests for assistance should be, insofar as possible, submitted annually through one agency designated for this purpose.This procedure is essential in order to insure the smooth operation of the programme. Otherwise Canada may be faced with several requests of which it can only finance a few. Only the government of the country receiving assistance can say which requests should be considered and which should be discarded.

Arrangements with regard to experts are the object of separate agreements between Canada and the receiving countries.

Arrangements with regard to training programmes are governed by regulations approved by Treasury BoardThese regulations will be circulated in due course to all Missions.

[ENCLOSURE 2]

Memorandum

Aid to Africa – General Approach

The Memorandum to Cabinet on aid to Africa† deals with the types of assistance to be provided in the following terms:“This amount ($3.5 million) would make it possible to do useful things in Africa over the next few years: for example, to continue to expand ordinary technical assistance, to supply a certain amount of equipment for Canadian technical assistance experts working in Africa, to assist in the establishment of small training institutions in the area, to contribute to the improvement of transport and communication facilities, and perhaps to conduct certain surveys of resources and to participate in or undertake … sound capital projects … Canada would continue to send individual teachers to Commonwealth countries in Africa …”

Technical AssistanceTechnical assistance should combine the exchange of persons with economic development or, more precisely, the development of knowledge and skills. Canadian practice seems to place the main emphasis on only one of these two aspects of technical assistance – the exchange of persons. An analysis of Canadian programmes does not reveal any immediately discernible rationale in terms of economic development. It seems to consist of sending a certain number of individuals abroad and bringing a certain other number to Canada, not of making a systematic and sustained attack on specific and well-defined problems.This emphasis on the exchange of persons arises from the rather rigid separation of technical assistance from other forms of assistance. The administration of Canadian aid programmes has been organized on the basis of this separation. As a consequence, the technical and capital assistance programmes do not complement each other as often and as well as they might. Certain types of projects are difficult to undertake because the planning and administrative procedures are not set up to handle them. The isolation of technical assistance from other types of assistance has encouraged the tendency to think that the essential task is to find training places in Canada and to find Canadians willing to serve abroad. The purpose behind the movement of the people concerned is treated at best as a secondary consideration.It is important, therefore, that a much broader concept of technical assistance should be adopted in the case of the enlarged programme of aid for Africa. Much of the remainder of this paper is an attempt to define such a concept. The later sections deal briefly with surveys of resources and capital assistance.

Trainee ProgrammesTrainee programmes are those parts of our technical assistance programmes which consist of bringing to Canada persons (a) to study in universities and other educational institutions and (b) to undergo agreed, often short-term, courses of training in such areas as administration, industry, agriculture, power and transportation. The first type of training might be referred to as educational assistance (trainees) and the second as technical training (trainees).

Educational Assistance (Trainees)Requests for scholarships and fellowships to attend Canadian universities and other educational institutions should be related to and justified in terms of the manpower needs and development programmes of the countries making the requests. Thus, Ghana, having made a survey of its manpower needs, may decide to train so many engineers over the next decade. As part of this training programme, it may (1) expand its own training facilities; (2) bring in teachers from abroad; and (3) send some Ghanaians abroad to study. As a contribution towards the fulfillment of this programme, Ghana may ask Canada to provide 15 training places. It could also ask Canada to send some teachers and to provide some equipment for the new faculty buildings. Indeed, Canada might even take the initiative in suggesting that it do so. The same general approach should be taken to other forms of the educational assistance (trainees) programme, e.g., teachers.The two essential features of this approach which should be kept in mind are that assistance should normally be given only if the requests (1) are directly related to specifically defined manpower needs and (2) the requesting countries have training programmes designed to meet that need and are carrying that programme forward; in other words, aid should be only part, and can be only a minor part, of the main effort. Requests, prepared in these terms, would be submitted to us along with the balance of the programme on or before November 30th of each year.A possible objection to this approach is that the countries concerned do not know their manpower requirements well enough to define their needs so precisely. However, the bulk of Canadian assistance in Africa will be given to Ghana, Nigeria and Sierra Leone. In Ghana, the Ford Foundation has completed a manpower survey and it could prove of some use to us in formulating a programme. Furthermore, Ghana probably has (and our High Commissioner could confirm or deny this) some specific manpower training programmes which we could complement and to which we could tie our educational assistance (trainees) programmes. In Nigeria, a manpower survey might have been carried out. If one has not been carried out possibly one of the first things which we could do under our programme would be to make a survey. In any event, we could tie our aid to any specific, even though limited, manpower development programmes presently in operation and rely on surveys covering only part of the manpower requirements, e.g., the Ashby Report. The Ashby Report, incidentally, states that Nigeria needs 1000 teachers per year for the next few years. Under the approach suggested in this paper, Canada would not simply provide, say 50 teachers a year towards meeting this target. We would try to locate our teachers in a few institutions, equip these institutions and bring Nigerians to Canada for teacher training. We will have some $0.5 million to spend in other areas in Africa. It is doubtful whether we could apply exactly the same procedure to these areas as to Ghana, Nigeria and Sierra Leone.The approach suggested above offers several advantages. Any training programme which we undertook would be part of a larger programme to which the requesting country would be making a substantial contribution. This in itself would give some assurance that the programmes to which we were contributing were treated seriously by the requesting countries. The approach would also allow us to concentrate on relatively few carefully chosen projects. Requests for educational assistance (trainees) would be submitted in blocs, e.g., 15 in teaching, 10 in engineering, 5 in medicine, and would complemented by other parts of our programmes. The effectiveness of our aid would thus tend to be maximized and its Canadian identity more fully retained. Some continuity, which is not a strong feature of our present procedures, would be given to the programme. An incidental but important advantage of this approach is that it would tend to reduce the overall administrative burden. Under-Graduate students should not, as a rule, be encouraged to come to Canada under our technical assistance programme. One of the most important steps which less-developed countries can take towards the development of their educational systems is the establishment and expansion of undergraduate facilities. Graduate schools can come at a much later date. However, the shortage of undergraduate facilities may make the rigid application of this principle undesirable. Exceptions should be made only for strictly limited and defined purposes and only in conjunction with efforts of the requesting countries to establish the required local facilities. The establishment of these facilities even under the best of circumstances may take time.

Technical Training (Trainees)

The same general approach should govern the technical training (trainees) programme. In other words, the programmes should be related to specific and well-defined manpower needs and to specific and well planned efforts on the part of the requesting government to meet those needs.Broadly speaking, it is possible to distinguish two categories of persons who would come to Canada for technical training. The first category would consist of people who were needed to meet a fairly precise and known need. Thus, for instance, a country may be erecting a new plant which, when completed, will require certain types of skills to operate it. The second category would consist of people who have had considerable experience in the fields in which training is requested. The purpose of their visit to Canada would be to broaden their general knowledge and understanding of the problems with which they are dealing, and of the methods of handling them. Their visits to Canada would take more the form of an observation tour than of a training course. Generally speaking, a higher priority should be given to the first category or type of programme than to the second. Persons coming to Canada essentially for observation purposes would already be fairly highly qualified in their fields and their visit to Canada might add only marginally to their qualifications. Furthermore, it might be more difficult to relate the programmes proposed for them to specific needs and development efforts. The emphasis would tend to be more on the exchange of persons aspect of our programmes. These disadvantages do not arise to the same extent in the case of trainees falling under the first type of programme.As in the case of educational assistance (trainees) programmes, requests should be submitted by a given date. (The suggested date of November 30th would apply to the programme as a whole.) However, unlike educational assistance (trainees) programmes, the implementation of technical training (trainees) programmes would have to be staggered over the year as places in industry and government became available. Technical training in Canada, as in the case of educational assistance given in Canada, should, whenever appropriate, be coupled with the provision of experts and of equipment.

Educational Assistance (Experts)

That part of our technical assistance programme which consists of sending experts abroad may also be divided into educational assistance and technical training. The general approach suggested above should also apply to these programmes.Educational assistance (experts) will probably consist of sending teachers abroad and sending experts abroad to advise on general or specific educational problems. Within this framework adequate priority should be given (1) to sending teacher trainers abroad and (2) to concentrating these teacher trainers in a few institutions.Technical Training (Experts)

Technical training (experts) should, as in the case of other forms of technical assistance, aim at the solution of a few carefully selected problems rather than aim broadly at the whole range of economic development problems.Experts in the technical training field can be generally divided into those who act as advisers and those who act in operational capacities. Both types have their place but requests for advisers probably need to be treated more carefully. The risks taken in sending advisers abroad are (1) that their advice will not be followed and (2) their advice may lead to exaggerated hopes for more Canadian assistance. In considering requests for advisers, it is suggested therefore that they should be provided only (1) if there is a reasonable chance that the advice of the expert will be taken, e.g. a decision has been taken to set up a Central Bank and advice is needed on how to proceed, and (2) in fields where, given the size of our programme and our industrial capabilities, we would be able to provide additional assistance should this be recommended by the expert.In the case of experts acting in operational capacities, priority should probably be given to; (1) experts said by other Canadian experts in the field to be needed; (2) experts who will train a large number of people; and (3) teams of experts who will tackle several facets of the same problem or who will tackle it over a wide geographical area. As an example of (1), one might mention the fisheries expert who recommends sending an expert in co-operatives, an expert in marketing, an expert in fish preservation, etc.; as an example of (2), an expert needed at an agricultural maintenance shop used for demonstration purposes; and as an example of (3), several experts to set up and teach at several such shops.

EquipmentAs mentioned at the beginning of this paper, it has been the Canadian practice to treat most equipment as capital assistance. This is not a very satisfactory way to proceed and is often difficult to justify in terms of the end-use of the equipment provided. Thus, equipment provided for an agricultural machinery maintenance shop at which a Canadian is to be stationed partakes more of technical than of capital assistance; but if similar equipment were provided for 10 or 15 such shops, it may be more in the nature of capital assistance. Similarly, the provision of one aircraft for crop spraying might be considered as technical assistance if it is to be used for experimental purposes, but as capital assistance if it is to be added to an existing fleet of aircraft. It is therefore suggested that the distinction between capital and technical assistance should, for the purposes of the African programme, if not disappear, at least be blurred and that the concept of technical assistance itself be enlarged to include substantial quantities of equipment.Equipment might be required by an expert or by a team of experts. It might consist of as little as a blackboard or as much as a workshop. In any event, the provision of such equipment should be given a high priority. But the requirement should insofar as possible be established at least in general terms before the expert leaves Canada and the requesting government should in the first instance be asked if it can or will provide it. If it cannot or will not provide it, the equipment should be included in the country’s annual programme, or, alternatively, the expert should not be sent (this course of action would be followed, for instance, if the equipment is not made in Canada, or if there is a prime facie case for having the requesting government provide it). If additional equipment is required after the expert reaches his destination, it could be financed under the small projects procedure, from the contingency fund or by an adjustment in the country’s programme.Equipment might also be needed to complement a training programme in Canada, e.g. the training of technical school teachers combined with the establishment of a technical school abroad. The equipment might be part of an integrated programme involving bringing trainees to Canada and sending experts abroad. In both cases, the provision of equipment should be given a high priority, but care should be taken to avoid the habit of making small presentations to trainees leaving Canada.Requests for equipment may originate in receiving countries independently of any requests for training places or experts. Investigation of such requests could lead us to sending experts abroad to supervise its installation and use. In any event requests of this kind should be examined with care. As in the case of expert and trainee programmes, the provision of equipment should be tied to the solution of specific problems or to meeting specific needs and in which the government of the requesting country has shown an interest by devoting to them some of its own resources. The “bits and pieces” approach should be avoided.Equipment might also be recommended, but not required, by an expert. Provided that it is also requested by a receiving government, it should be treated in much the same way as requests originating solely with a government.Surveys of ResourcesSurveys of resources have been financed under our other aid programmes. It is assumed that they would be eligible for financing under our African programme.General basic surveys of resources are of permanent value and should probably be given a high priority within the framework of our aid programme to Africa. However, in the case of the more specialized surveys, greater caution should be exercised before they are accepted for inclusion in our programme. The weaknesses of undertaking these types of surveys are similar to those of providing expert advisers: Will the government of the country surveyed take any action following the completion of the survey? For instance, if the purpose of the survey is to establish the feasibility of double cropping, there should be some concrete evidence that the requesting government has more than a theoretical interest in the matter, e.g. that it has encouraged double cropping in areas where it is known that it is feasible, that it has at least the nucleus of the administrative machinery required to spread the practice, that it is prepared to set aside funds to finance any necessary capital investments. The results of such surveys should be followed closely not only in order to assess their value, but also to find out whether any good projects which we could undertake emerge from them.

Capital AssistanceGiven the amount of aid funds available and the proposal to enlarge the definition of technical assistance, the amount of funds remaining for capital assistance could be small. However, in the last analysis, this will depend on the nature of the requests received.It is not proposed to follow the Colombo Plan practice of setting aside so much for technical and so much for capital assistance. The total amount of funds available does not lend itself to such a division. However, it is suggested that within the overall limits of its allocation, each country should remain free to request as little or as much of one or the other type of assistance as it wishes.

Conclusions and SummariesThe approach outlined in this paper is concerned essentially with technical assistance, but the general principles on which it rests can be applied to capital assistance. Basically, it suggests that technical assistance should be thought of in terms of projects; that is the three main elements which enter into a technical assistance programme, i.e. experts, trainees and equipment, should be used not in isolation from one another but to complement each other; that the purpose of each project should be defined in specific rather than general terms; and that the governments of the countries concerned are sufficiently interested in the project to have invested or to be prepared to invest some of their resources in it.It is fully realized that the suggested approach and the principles underlying it cannot be rigidly applied. The approach has not been applied to countries receiving aid under the Colombo Plan where conditions are probably more favourable than in Africa. However, in India, we have under investigation the possibility of staffing and equipping eight engineering colleges which are being financed out of counterpart funds; in Malaya, we are thinking of sending a medical team which would be attached as a teaching team to a hospital where Malayan doctors graduating from the recently established School of Medicine would go for further training; also in Malaya, we are thinking of helping to establish with the help of the University of British Columbia a school of Public and Business Administration. Under this latter scheme, teachers would be sent to Malaya from Canada and counterparts would be trained in Canada. The execution of all these projects would be spread over several years. Our overall objective would be to undertake similar projects in Africa.The development of such projects will take time and particularly during the first year of operation of the enlarged programme of aid for Africa, it might be difficult to find a sufficient number of them to absorb all the funds available. At the same time it should be realized that unless a few such projects are undertaken, it may prove difficult to spend the funds voted by Parliament. While allowances must be made during the first year of the operation of the programme and while it is recognized that Ghana, Nigeria and Sierra Leone may not know their needs as exactly as may be required, our objectives should be to implement the suggested approach as fully as possible as soon as possible and that the first step towards this objective should be taken this year.

In summary:

The practice followed under the Colombo Plan of setting aside a specific amount for technical assistance should not be followed in the case of the African programme.

Within the limits of its allocation, each country should be free to receive as much technical assistance or as much capital assistance as it wishes. The division between the two types of assistance within a country’s allocation should ultimately be decided by that country.

The size of any capital assistance project is likely to be small.

The definition of technical assistance should be enlarged to include substantial quantities of equipment either in direct support or independently of our expert and training programmes, but with a higher priority being given to equipment needed to support these programmes.

Training and experts programmes should be concentrated on meeting a few carefully selected and defined needs. In practice, this would mean:

training in Canada as well as abroad should be given to a limited number of groups of people, the members of each group taking their training in the same field;

the movements of people to and from Canada should insofar as possible, complement each other;

experts should concentrate their efforts in a few fields and the team approach should be given a high priority;

the provision of equipment needed by experts or to complement training programmes should be given a high priority;

a greater degree of continuity should be built into our technical assistance programmes.

One of the main criteria for selecting projects for assistance should be extent to which requesting countries are devoting their own resources to meeting the need or solving the problem.

Subject to (5) above, the following priorities should be generally accepted in relation to our training and experts programmes:

technical training (experts): experts acting in an operational rather than an advisory capacity; experts who train large numbers of people; experts organized in teams.

General basic survey of resources should be given a high priority, but the more specialized surveys should be undertaken only if it appears that results will be used almost immediately.

608. DEA/12882-40

Memorandum from Economic (1) Division to Head, Africa and Middle East Division

CONFIDENTIAL [Ottawa], June 14, 1961

African Panel

At our meeting last week you asked me to set down some thoughts I expressed in general terms on the subject of Canadian assistance to Africa. I think there were two main points I wished to make:

We should be on our guard against the temptation to think of aid as providing the answer to all of emergent Africa’s economic problems, or even as offering a sure-fire formula for satisfying the aspirations of those countries for rapid economic development. Even without the evidence of the last Assembly there could be no doubt that the hopes and ambitions of Africans far exceed the capacity of the West to gratify them, and we are entering a period during which, whatever we do, and with the best will in the world, there are bound to be disappointments, misunderstandings, complaints and recriminations. This is not to suggest a defeatist attitude; quite the contrary, but we must keep our eyes open to the realities of the situation and know what we are letting ourselves in for over the next decade or longer. Fortunately for us, Canada has no colonial or slavery system past to live down, but we are nevertheless lumped together with the USA and Europe in the eyes of black Africa as the countries on which they have the strongest moral claim for economic support after they become independent. It is almost as if we in the West “owe” it to them in reparation for past exploitation.It will be for consideration by the Panel at some stage how far it would be proper to go in allowing the idea to gain currency (e.g. among African delegations at the UN), which it probably will if we do nothing about it, that Canada stands ready to play its part in Africa comparable to efforts we have made and are making for, say, the Colombo Plan countries. On this point, I would repeat that while it might be unduly burdensome for the EAO to send a representative to regular meetings of the Panel, we would hope that they could nevertheless participate whenever substantive questions of aid are up for discussion. In particular, I would suggest that they be asked to comment at an early stage on the general policy question involved here.

My second point arises out of (a). The Panel is now made up exclusively of members of this Department, who may perhaps be expected to interpret the various issues before us in the light of their predominantly political training and background, as would be only natural. We may be tempted to look for solutions to problems mainly in terms of Canada’s interests in, and relationships to , African countries. To the extent that this may be a fair comment, I would urge our group to approach problems having economic implications in the perspective of the broader global issues between the ‘have’ and the ‘have-not’ countries of the world. I mentioned at the last meeting the desirability of keeping in mind the known attitude of the Government towards aid questions generally, and of tempering our deliberative processes with an awareness of the limitations imposed on Canada’s willingness and ability to join others in playing a ‘big brother’ role in Africa by the exigencies of our own domestic economic situation (to say nothing of the political situation), and by the Government’s sense of priorities in lending a helping hand. As I think I mentioned, it appeared to me highly unlikely that the Government would increase its African aid programme ($10,500,000 over 3 years) at the expense of our Colombo Plan client countries, even though the commitment undertaken at Montreal in September, 1958 to raise our contribution from $35 million to $50 million expires, I think, in 1962-3. I doubted that the Government would revert to the lower figure, especially after the recent offers at the Indian and Pakistan Consortia meetings in Washington. It therefore follows that a more active Canadian role in promoting the economic development of Africa would involve additional burdens on the Canadian taxpayer, which is a point to be borne in mind during the coming year when an election is possible. We are under pressure from the UK to extend and enlarge our aid programme to the West Indies (which might have much more appeal to the Maritime Provinces than aid to rather more remote Africa), and from Alcan to do something big for British Guiana. The Government is also in the process of expanding the scope of its export financing facilities, which we represented to India and Pakistan as a form of aid through long-term credits. So, as you see, there are many competing demands on Canada’s limited resources, and it will behoove us to bear this in mind when pondering on the question of how active a role we wish to play in Africa. Present indications appear to be that until public (and Government) thinking in Canada matures more fully in favour of African involvements, going beyond the strengthening of our diplomatic representation and aid to Commonwealth countries, Canadian delegations at the UN and other international bodies should move forward with a certain amount of caution on African questions of a kind likely to involve “put up or shut up” issues for us.

D.B. WILSON

609. DEA/12882-N-7-40

Director-General, External Aid Office, to Under-Secretary of State for External Affairs

Ottawa, June 29, 1961

Attention: Mr. A.E. Ritchie1The Minister has been very anxious that we should proceed with the implementation of an African aid programme as early as possible. During the last few months, we have been endeavouring to have the eligible recipient countries of Africa put forward well conceived projects for our consideration. The results have been somewhat discouraging with the exception of an aerial survey and contour mapping project in Nigeria.In the interest of haste and in compliance with the wishes of the Minister, I have prepared and forwarded the attached submission for his consideration and onward transmission to Cabinet. Your concurrence with the action taken in this particular instance, and approval of the Nigerian Aerial Survey Project, as part of the 1961-62 Special Commonwealth African Aid Programme, would be appreciated.

Yours sincerely,H.O. MORAN

610. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], June 10, 1961

Present

The Prime Minister (Mr. Diefenbaker) in the Chair,

The Secretary of State for External Affairs (Mr. Green),

The Minister of Finance (Mr. Fleming),

The Minister of Transport (Mr. Balcer),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of Justice (Mr. Fulton),

The Minister of National Defence (Mr. Harkness),

The Minister of Citizenship and Immigration (Mrs. Fairclough),

The Minister of Fisheries (Mr. MacLean),

The Minister of Labour (Mr. Starr),

The Postmaster General (Mr. William Hamilton),

The Solicitor General (Mr. Browne),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of National Health and Welfare (Mr. Monteith),

The Minister of Defence Production (Mr. O’Hurley),

The Minister of Public Works (Mr. Walker),

The Associate Minister of National Defence (Mr. Sévigny),

The Minister of Forestry (Mr. Flemming),

The Secretary of State (Mr. Dorion),

The Minister without Portfolio (Mr. Halpenny).

The Secretary to the Cabinet (Mr. Bryce),

The Assistant Secretary to the Cabinet (Mr. Labarge).. . .

African Aid Programme, Nigeria; Aerial Survey

The Secretary of State for External Affairs recommended granting a request of the Federation of Nigeria that Canada provide, under the Canadian Special African Aid Programme, an aerial survey and contour mapping of 24,800 square miles in the South-western area of the country.It had been stated by the Nigerian authorities that mapping was urgently required before planning any proposed development sites. Experience with other major development programmes had shown that they had been adversely delayed because of lack of contour maps.The total cost of aerial photography, ground survey and map compilation had been estimated at $1,350,000. Work could commence this October, and the expenditure during the 1961-62 fiscal year would approximate $350,000.An explanatory memorandum had been circulated, (Minister’s memorandum, June 28 – Cab. Doc. 269-61).†

The Cabinet agreed with the recommendation of the Secretary of State for External Affairs to grant the request of the Federation of Nigeria for an aerial survey and contour mapping of a 28,400 square mile area of Nigeria, and approved the allocation of $350,000 from the 1961-62 appropriation from the Special Commonwealth African Aid Programme towards the cost of this project, the balance of approximately $1 million to be a first charge against the Nigerian allocation under the 1962-63 Programme.. . .

I agree, and for the reasons you give, that it is desirable that Canada provide aid to the West Indies, British Honduras and British Guiana. I wonder, however, if a Caribbean aid programme would be the best framework for Canadian aid. You assume that the United States would be willing to contribute to such a plan. The United States might be willing to coordinate its aid with that provided by Commonwealth countries, but I doubt if it would enter a regional aid programme based on the Commonwealth association and which cuts across traditional inter-American ties. It is likely to encourage the three dependencies, when they achieve independence, to join the Organization of American States. As a result of the new U.S. aid programme, it would be in their interest to do so and the United Kingdom Colonial Office is encouraging the West Indies, at least, to consider early membership. (See letter No. 874 of May 30, 1961 from London).†

I do not think that membership of these emerging states in the Organization of American States would prejudice Canadian interests. On the contrary, I think we should welcome any developments which strengthen the Organization of American States which, whatever else it may be, is a useful instrument in the conduct of relations between the United States and the countries to its south. United States aid is to be distributed largely through the Inter-American Development Bank in order to avoid the direct confrontation of donor and recipient which you fear.

At the same time, it is desirable, I believe, that these territories also maintain their ties with the Commonwealth and there is certainly something to be said for a Commonwealth aid programme for them. The sending of a token number of experts from African and Asian members could be politically useful particularly in the case of British Guiana, and some system might be devised to enable the United Kingdom or Canada to underwrite indirectly the expenses of such experts.

Nonetheless, despite the advantages of strengthening the Commonwealth ties, I think that all things considered it would be better for Canada to provide aid on a bilateral basis. As you point out, we have specifically Canadian reasons for maintaining strong ties with British Guiana and the West Indies and the Canadian aspect is likely to be lost in a Commonwealth scheme. There is also some danger in associating Canada with the United Kingdom which, as the former colonial power, is bound to be regarded in an emotionally charged way in the initial years after independence.

I have mentioned possible United States objections to a Caribbean aid programme. I think that in addition Canada’s own relations with Latin America would suffer if any Commonwealth scheme were expanded to include Haiti or the Dominican Republic. Canada’s ties with the United Kingdom, which is still regarded as a colonial power in Latin America, are generally misunderstood in this area. Canadian participation in a plan which might seem to run counter to hemispheric solidarity could arouse suspicion and antagonism.

I might add that it would be preferable to establish a Canadian programme of aid before these territories join the Organization of American States because otherwise we will be laying ourselves open to the charge of discriminating between O.A.S. members.

I doubt whether Canadian aid could have a decisive influence in protecting Alcan’s bauxite deposits in British Guiana. If it appeared in any public statement that this was the objective of our aid, the aid would be “counter-productive” and might lay us open to blackmail. Moreover, there is a question of how far the Canadian Government should go in indirectly subsidizing, through the provision of aid, the interests of a private company.

Any aid Canada extends will be small compared to that of the United States. These dependencies will probably find their most fruitful access to aid through the new U.S. inter-American aid programme. This should be borne in mind in attempting any realistic assessment of the influence of Canadian aid both political and economic.

Y. BEAULNE

612. PCO

Memorandum from Secretary of State for External Affairs to Cabinet

CABINET DOCUMENT NO. 320-61 [Ottawa], August 28, 1961CONFIDENTIAL

Aid Programme for Former British Territories in the Caribbean

A Decisive Time for the Future of the CaribbeanImportant political and social developments are reaching a crucial stage in the Caribbean. The Federation of the West Indies will emerge as an independent country next year, so that there will shortly be a second North American country as a full member of the Commonwealth. British Guiana had an election this August and may achieve its independence as early as 1962, and British Honduras will also be pressing for internal self-government and eventual independence. Castro’s revolution in Cuba has made a profound impact on the entire Caribbean and Latin American area, and we may be reaching a turning point for the whole future course of events in this region. This is particularly true with respect to British Guiana because Dr. Jagan, whose Party was successful in the recent election and who appears most likely to be the leader after independence, is clearly attracted by Castro and may seek closer ties and development assistance from the Eastern bloc when independence from the United Kingdom is achieved. He is not well disposed to joining with the West Indies Federation and there is some doubt whether he would seek to keep British Guiana in the Commonwealth. The situation in the West Indies is more stable, but experience in the region indicates that it could change rapidly if tension in the area should increase and if British Guiana were to move in an anti-Western direction.A very important factor bearing on the way events develop will be the aid and development programmes of the West. It is therefore recommended that the Cabinet give urgent consideration to the question of the form and extent of a continuing aid plan for the British Territories in the Caribbean in order:

to take advantage of the opportunity for discussion of this subject with other Commonwealth countries at the meeting of Commonwealth Finance and other Ministers (the Commonwealth Economic Consultative Council) to be held in Accra in September;

to ensure that some preparatory discussions can get started now that elections have taken place in Guiana and before the new governments in the area move too far in other directions; and

to show the West Indies Federation at the time when we are renegotiating our trade agreement, that we have a continuing interest in their economic progress.

Canadian Aid ProgrammeUnder the present arrangement Canadian aid to the British Territories in the Caribbean is applied almost entirely to the West Indies. The only aid available to British Honduras and British Guiana amounts to $100,000 for technical assistance under the Commonwealth Technical Assistance Programme. Under the existing Canada-West Indies Aid Programme, Canada is committed to spend $10 million during the five fiscal years 1958-59 to 1962-63. The Programme covers both capital and technical assistance. Of the $10 million, the amount available for new projects between now and March 31st, 1963 is approximately $1.7 million. The recent Canada-United Kingdom-United States Mission to the West Indies indicated that there are projects in the smaller islands which could very quickly use up this balance. If there is to be no gap in Canada’s aid programmes to the West Indies it is essential to decide on future plans as soon as possible. Now that the British Caribbean territories are approaching independence, Colonial Development and Welfare Funds will no longer be available from the United Kingdom and Canada could hardly offer less aid than before independence.Canadian Interests

Aside from our definite political interests in the stability of a Commonwealth member, and of territories in the North American area, Canada has a very substantial trade and investment interest in the Caribbean. There is a long history of close association between the West Indies and Canada and the West Indies are traditionally an important market for Canadian goods (our exports to the Federation have been running at about $40 million a year). This trade is important because it is made up of a wide range of products including substantial amounts of industrial goods which are frequently the products of small firms in Eastern Canada and constitute an important share of their total business. It is perhaps even more important that Jamaica and British Guiana are the chief source of supply of bauxite to the Canadian aluminum industry. At the present time the total investment of ALCAN in these two areas is more than $100 million and ALCAN gets 66% of its bauxite from British Guiana. Any uncertainty about this source of supply could have serious disruptive effects on the aluminum industry in Canada and worsen its competitive position. The lesson of Castro’s Cuba is particularly relevant in this connection. ALCAN is the largest but not the only Canadian investment in this area. Total Canadian direct investment in the West Indies was estimated to be worth $155 million in 1958 and is probably greater now. This includes branches of manufacturing firms, banks, insurance companies, utilities and real estate holdings. There are also Canadian holdings of West Indian, mainly Jamaican, equities.Possible Future Aid Arrangements

If the Canadian aid programme for the British Territories in the Caribbean is to be continued or increased, it is recommended that serious consideration be given to the establishment of a programme similar in nature to the Colombo Plan. The aid arrangements would be on a bilateral basis but a number of other Commonwealth countries would be asked to participate and to contribute. In addition, on the analogy of the Colombo Plan, while the United States would be informed of what is being considered, it would not be invited to participate until after Commonwealth countries had approved the idea.Advantages of a “Colombo Plan” Arrangement

It would be a valuable Commonwealth initiative which would demonstrate the continuing vigour and importance of the Commonwealth of Nations. It could be particularly valuable at the present time when the United Kingdom attitude on the question of joining the Common Market may be casting some doubt on the future value of the Commonwealth.

It would enable aid arrangements to be made in a way which would contribute most to the dignity and sense of responsibility of the recipient countries. They would be full members of the organization, and there would be no implication of any continuing colonial or dependent status.

It would enable newly emerging countries in the Caribbean to benefit from the experience in economic, social and cultural fields of other Commonwealth countries, including Asian and African countries which themselves have recently emerged as independent nations within the Commonwealth.

It would provide a group and a forum within which leaders such as Dr. Jagan could find scope to demonstrate and develop their capacity as political leaders, in a constructive way, without being tempted or forced into extreme reactions along Castro lines.

It would start as a distinctive Commonwealth initiative closely related in its aims to President Kennedy’s hopes and plans for Latin American development, but it would take place in what is mainly a Commonwealth region. So far as Canada is concerned, it might be regarded as a more effective and more appropriate contribution at this time than full-scale Canadian involvement in Latin America. In addition, this proposal would have the advantage of combining the two programmes mentioned in paragraph three above, thus simplifying the administration of Canadian aid in that area.Preliminary Consideration at Commonwealth Meeting at Accra

The meeting at Accra provides an ideal opportunity for Commonwealth countries to discuss a possible new aid programme for this region. It is not proposed that the Government should now make a definite decision, in time for the Accra meeting, on a major new initiative on future aid plans and arrangements for the former British Territories in the Caribbean. However, it is desirable that the meeting at Accra make a start in this direction since the indication of preparatory plans could itself have a substantial influence on developments in the West Indies and in British Guiana.Recommendations

The Ministers representing Canada at the Accra meeting should be authorized to explore with the representatives of other Commonwealth Governments the possibilities of setting up a programme for aid to British territories in the Caribbean, particularly the West Indies Federation, British Guiana and British Honduras, on the analogy of the Colombo Plan.

While not taking the initiative in proposing such a programme, Canadian Ministers may indicate that if there should be eventual Commonwealth agreement to set up a programme for aid to former British territories in the Caribbean, Canada would be prepared to participate. Although no financial commitment would be made at this stage, Canadian Ministers at Accra could indicate that Canada would be prepared to contribute not less than the present level of Canadian aid to the territories concerned, which averages about $2.1 million annually. If other countries were prepared to participate in such a programme Canada might later review the size of its contribution in the light of the total contributions subscribed by other Commonwealth countries.

If other Commonwealth Governments are willing to proceed with preliminary steps toward a cooperative aid arrangement for the Caribbean, an announcement might be made at the Accra meeting that a group of experts is being appointed to make recommendations to Commonwealth Governments regarding future aid arrangements. The group might include certain senior officials experienced in aid matters from a number of Commonwealth countries, for example, the United Kingdom, India, Pakistan, Ghana, Nigeria and Canada.The expert group would consult about the most desirable arrangements with the authorities in the West Indies and other Caribbean territories concerned, with the Governments of Commonwealth countries and with the United States Government. The group would not be expected to recommend a scale of contributions from member governments but it would be empowered to consult with them and to report any indication of the amounts they might be willing to contribute.

Following the report of the group of experts, which might be in six months time, Commonwealth Governments would consider the report and decide on the next steps to be taken.

H.C. GREEN

613. PCO

Extract from Cabinet Conclusions

SECRET [Ottawa], September 7, 1961

Present

The Prime Minister (Mr. Diefenbaker) in the Chair,

The Minister of Finance (Mr. Fleming),

The Minister of Trade and Commerce (Mr. Hees),

The Minister of Transport (Mr. Balcer),

The Minister of Veterans Affairs (Mr. Churchill),

The Minister of Justice (Mr. Fulton),

The Minister of National Revenue (Mr. Nowlan),

The Minister of National Defence (Mr. Harkness),

The Minister of Citizenship and Immigration (Mrs. Fairclough),

The Minister of Fisheries (Mr. MacLean),

The Minister of Labour (Mr. Starr),

The Postmaster General (Mr. William Hamilton),

The Solicitor General (Mr. Browne),

The Minister of Mines and Technical Surveys (Mr. Comtois),

The Minister of National Health and Welfare (Mr. Monteith),

The Minister of Agriculture (Mr. Alvin Hamilton),

The Minister of Defence Production (Mr. O’Hurley),

The Minister of Public Works (Mr. Walker),

The Associate Minister of National Defence (Mr. Sévigny),

The Minister of Forestry (Mr. Flemming),

The Secretary of State (Mr. Dorion),

The Minister of Northern Affairs and National Resources (Mr. Dinsdale),

The Minister without Portfolio (Mr. Halpenny).

The Secretary to the Cabinet (Mr. Bryce),

The Assistant Secretary to the Cabinet (Dr. Hodgson).. . .

Aid Programme for Former British Territories in the Caribbean

The Minister of Finance said that the Ministers representing Canada at the Accra meeting required guidance on the attitude they should take on aid to former British Territories in the Caribbean. The Secretary of State for External Affairs had suggested that, while not taking the initiative in proposing such a programme, the Canadian Ministers might indicate that Canada would be prepared to participate if there should be eventual Commonwealth agreement to set up an aid programme for these countries.Under present arrangements Canadian aid to the British Territories in the Caribbean applied almost entirely to the West Indies. This programme had about 18 months more to run. Dr. Jagan of British Guiana was planning to visit Washington in October of this year, and was expected also to visit Ottawa at that time. He was clearly attracted to Castro, but had indicated that he hoped to secure aid from the democracies and hoped that British Guiana would remain in the Commonwealth.The Caribbean area was in a state of flux. A referendum was to be held in Jamaica on possible membership in the West Indies Federation. British Guiana might achieve its independence by next year, and British Honduras was also pressing for internal self-government. In these circumstances an alternative course for Canadian Ministers at Accra would be to state merely that the whole question would be further considered in a year or so when the situation was clearer.An explanatory memorandum had been circulated, (Memorandum, Secretary of State for External Affairs, August 28 – Cab. Doc. 320-61).

During the brief discussion some said that Canada should take the initiative in this matter. A new aid programme would provide an answer to pressures for the admission to Canada of large numbers of immigrants from these countries. Others said that any such plan should be deferred because it would be useless as a negotiating gambit if it had been announced previously. Furthermore, any announcement on this subject might be regarded by some as an attempt to influence the referendum in Jamaica.

The Cabinet agreed that the Ministers representing Canada at the Accra meeting should avoid taking any position on a possible future plan of Commonwealth aid to former British Territories in the Caribbean, but should state that the question would receive future consideration in the light of the developing situation in that area.

R.B. BRYCE

Part 6

Section A - Colombo Plan

Pattern of Aid

614. PCO

Memorandum from Secretary of State for External Affairs to Cabinet

CABINET DOCUMENT NO. 267-61 [Ottawa], June 23, 1961

CONFIDENTIAL

Colombo Plan Pattern of Aid in 1961-62

The purpose of this Memorandum is to recommend a pattern of allocations of the $50 million which Parliament has been asked to vote for Canadian assistance under the Colombo Plan in 1961-62. Column (1) of the table immediately below sets out the allocations which were approved by Cabinet Ministers for the 1960-61 Colombo Plan funds and column (2) sets out the allocations which are recommended for the current fiscal year.

India, Pakistan and CeylonIt is not considered that any change would be warranted in the pattern of aid to India, Pakistan and Ceylon this year. It is therefore proposed that under the 1961-62 programme $25 million be allocated to India, $15 million to Pakistan and $2 million to Ceylon.Malaya

Under the 1958-59, 1959-60 and 1960-61 Colombo Plan programmes, Cabinet allocated a total of $4.3 million to Malaya. Serious difficulty has been experienced in obtaining sufficient suitable proposals for capital projects in Malaya. One reason for this is believed to be that Malaya’s own foreign exchange resources are at a relatively high level and she has not experienced serious difficulties in obtaining funds for her development programme. To date only $1,588,500 of the $4.3 million made available for the Malayan programme by Cabinet has been allocated to specific projects. Additional proposals for projects in Malaya are now under consideration but even if all of these are found to be satisfactory the allocation of an additional $1 million would provide more than enough to meet their costs in 1961-62. It is therefore proposed that $1 million be allocated for the 1961-62 programme in Malaya.Singapore

No regular programme of capital assistance has been established for Singapore, although some such assistance has been given from time to time on an ad hoc basis. Singapore was admitted to full membership of the Colombo Plan in 1959, and in the fiscal year 1960-61 Cabinet agreed to funds being reserved for a small project if a suitable one was proposed. One such proposal is now under consideration but no recommendation to Cabinet can be made just yet. In order that investigations and discussions may continue, it is proposed that under the 1961-62 programme $150,000 be set aside as a part of the unallocated reserve for allocation to Singapore if agreement is reached concerning suitable projects.Non-Commonwealth Countries

Under the 1960-61 programme a total of $1,550,000 was allocated to the non-Commonwealth countries. Of that total $700,000 was for the Thaketa Bridge Project in Burma and $850,000 was for the provision of wheat and flour which was distributed as follows:Burma $400,000Indonesia $350,000Vietnam $100,000

It is proposed that under the 1961-62 programme the provision of Canadian wheat and flour to the non-Commonwealth countries should be continued at least year’s level, that is to a total of $850,000. It is further proposed that negotiations with the non-Commonwealth countries proceed on the basis of $350,000 worth being provided to Burma, $350,000 worth to Indonesia and $100,000 worth to Vietnam. The final $50,000 would be reserved for an offer to Cambodia should they have a need for wheat or flour, or for a supplementary grant of wheat or flour to one of the other non-Commonwealth countries mentioned above.

It is desirable that the main emphasis under Canada’s Colombo Plan should continue to be placed on the Commonwealth members. However, there are impelling reasons for at least some Canadian capital assistance, apart from the provision of wheat and flour, being directed to the non-Commonwealth countries of the Colombo Plan. The needs of these countries for development assistance are very great and it is important that Canada show some sympathetic awareness of their difficulties. These countries do not have the advantages of the Commonwealth relationship and the Communist bloc is only too eager to extend its influence through the provision of economic assistance. In view of these considerations it is proposed that a total of $1 million be allocated for capital projects in the non-Commonwealth countries. When suitable projects have been proposed and investigated, specific country allocations will be recommended to Cabinet.Technical Assistance

It is proposed that $2 million be allocated for the technical assistance programme in 1961-62 rather than $2.5 million which Cabinet allocated in 1960-61. The reason for proposing a reduction from last year’s allocation is that annual technical assistance expenditures have hitherto been slightly less than $2 million. If it should prove that additional funds are required for the programme, these could be made available from reserve funds.Indus Development FundUnder the Indus Development Fund agreement Canada has undertaken to make available a total of $22.1 million over a period of ten years. The first year of the ten-year period commenced on April 1st, 1960.As a part of the 1959-60 and 1960-61 Colombo Plan programmes, a total of $3 million was set aside to meet payments under the Indus Development Fund agreement. To date, payments to the Fund have been less than $1 million. However, the Administrator of the Fund has indicated that the payments which Canada will be requested to make to the Fund in 1961-62 and subsequent years will increase sharply, and it would therefore be desirable to allocate an additional $3 million, under the 1961-62 Colombo Plan programme, for payments to the Fund.Wheat and Flour

It is assumed that Cabinet will wish to include approximately the same total amount of wheat and flour in the 1961-62 programme as was included last year, that is $12.5 million worth. It has been proposed in a previous section of this Memorandum that $850,000 worth of wheat and flour be offered to the non-Commonwealth countries of the Colombo Plan. It is recommended that the balance of $11,650,000 be divided in the same way as last year, that is $7 million to India, $3,650,000 to Pakistan, and $1 million to Ceylon.Summary of Recommendations:

I recommend:

that the funds Parliament has been asked to vote for the Colombo Plan in 1961-62 be allocated as follows:India $25,000,000Pakistan $15,000,000Ceylon $ 2,000,000Malaya $ 1,000,000Wheat and Flour for non-Commonwealth countries $ 850,000Capital projects for non-Commonwealth countries $ 1,000,000Technical Assistance $ 2,000,000Indus Development Fund $ 3,000,000Unallocated reserve (possibly to be used for projects in Singapore) $ 150,000Total $50,000,000

that officials be authorized to discuss with the authorities of the countries concerned the programmes to be carried out under these allocations, including the provision of Canadian commodities, equipment and services for economic development in the Colombo Plan area;

that these discussions proceed on the basis that a total of $12.5 million worth of Canadian wheat and flour would be included in $50 million total of assistance to be provided in 1961-62 to Colombo Plan countries, and that the specific allocations to be offered to these countries would be as follows:India $ 7,000,000Pakistan $ 3,650,000Ceylon $ 1,000,000Burma $ 350,000Indonesia $ 350,000Vietnam $ 100,000Cambodia or one of the other non-CommonwealthCountries of the Colombo Plan $ 50,000

that shipment of this wheat and flour be made as soon as possible after offers are accepted.

As has become the custom, the Ministerial Meeting of the Colombo Plan Consultative Committee was preceded by a meeting of officials, which opened on October 30th. Canada was represented at the Officials Meeting by the following delegation:Mr. James George, Canadian High Commissioner to CeylonMr. S. Pollock, Director, International Programmes and Contributions, Department of Finance, OttawaMr. A.S. McGill, External Aid Office, OttawaMr. R.S. MacLean, External Aid Office, OttawaMr. A. Kroeger, Office of the High Commissioner for Canada, New DelhiMr. I.L. Head, Office of the High Commissioner for Canada, Kuala Lumpur.The agenda for the Officials Meeting is attached as Appendix A.†

Participation of South Korea

Prior to the meeting, the Republic of Korea had canvassed members of the Colombo Plan on the possibility of becoming a member and had also applied to the Government of Malaya, as host to the 1961 meeting, for permission to send observers. The Malayan Government was not as expeditious as it might have been in obtaining the views of other member Governments on the Korean application and the Koreans, in any case, sent a delegation to Kuala Lumpur without waiting to hear if they would be welcome.The Canadian response to soundings by Korea was that Canada would have no objection to Korea being admitted to the Colombo Plan if the existing Asian members were prepared to welcome that country. At the same time, Canada felt there should be some consideration of the principle of extending the geographical area of the Colombo Plan before the Korean case was decided. Canada also indicated that it had no objection to Korea being given observer status if there was unanimous Asian acceptance. Other donor members of the Colombo Plan took a somewhat similar position. The only members which voiced definite misgivings about accepting the Koreans as observers were Ceylon and Indonesia. It was generally recognized that once Korea received observers status it would be difficult to refuse an application for full participation. Ceylon and Indonesia did not, however, apparently wish to persist in their opposition and increase the embarrassment of the Malayans, who had the Korean Delegation sitting on their doorstep. It was therefore agreed that Korean Observers should be admitted for this meeting without prejudice to any decision that might be taken about their participation in future.

The Annual Report

A very large part of the work of the Officials Meeting centres round the drafting of the Annual Report. While the drafting is sometimes a tedious process it does provide the opportunity for a thorough review of the economic situation of each member of the Colombo Plan, of the accomplishments of the Plan as a whole and of the tasks that remain. It is customary for each delegation to introduce its “country chapter” of the Report with a short speech in plenary session. The statement of the Leader of the Canadian Delegation introducing the Canadian section of the contributions chapter is attached as Appendix B.†Since 1961 marked the 10th Anniversary of the Colombo Plan, an attempt was made in this year’s Annual Report to review the past ten years. The result is a mixture of encouraging progress in some fields and disappointingly slow progress in others, with an unexpectedly high rate of population growth adding greatly to the problem of achieving satisfactory rates of economic growth.

Committee StructureThe effective work of the Officials Meeting was carried out in a series of Committees, listed below. The plenary sessions were almost entirely purely formal affairs in which committee reports were accepted without comment. The proceedings will therefore be described below under committee headings.Business Committee (All Delegations)Drafting Committee (10 members)Country Chapter Working Groups (of which Canada chaired the Groups on Sarawak and North Borneo and served on the India and Laos Groups)Sub-Committee on Technical Cooperation (10 Members including Canada)Sub-Committee on Information (7 Members including Canada)

Bilateral Discussions

As usual, a number of delegations sought to hold bilateral discussions with Canadian representatives and some of them presented “shopping lists.” A series of such meetings took place as soon as the committee work slacked off a little (in the second week). They have been reported separately.In these bilateral talks the Canadian representatives brought up one or two points of their own, including delays in receiving certificates relating to counterpart funds. A more systematic preparation for bilateral talks might be carried out before future meetings.Business Committee

The Business Committee, composed of the leaders of all delegations, is in effect the Steering Committee for the Colombo Plan Meetings. It meets on the eve of the Conference and intermittently throughout to discuss organization of committees and similar matters. The question of seating the Korean observers was discussed in the Business Committee, with the results mentioned above. Largely at the instigation of the Indian and Canadian Delegations, the Business Committee considered at the Kuala Lumpur meeting whether it would not be possible to reduce the total length of annual Colombo Plan meetings from three to two weeks. Although there was some opposition from smaller Asian members, the host government for 1962 (Australia) was asked to examine this possibility and inform member governments by June 1st, 1962 if it were found feasible.The Committee accepted and recommended to the Ministerial Meeting an American suggestion that the special subject for discussion at the 14th Meeting of the Consultative Committee in 1962 should be “Techniques and institutions for the mobilization of domestic savings for economic development.” Each member is invited to submit a paper, based largely on its own experience of this matter. The question which gave the Business Committee most trouble was that of the membership of Committees. Smaller Asian members, especially the Philippines, clearly felt they were not being given a turn as members of the Drafting Committee frequently enough. They were really directing their fire mainly at the British, Americans and Indians who have, by convention, become practically permanent members of this Committee and show no indication to step down. Australia, Canada, New Zealand and Japan have in recent years adopted an informal rotational arrangement by which one of them steps down each year.The Drafting Committee has 10 members and there were suggestions that this number should be increased. Canada and other countries resisted this on the grounds that it would make the Committee too large to be effective in its work. Various schemes for a rotational arrangement were suggested but none appeared very feasible and all were resisted by the British and Americans. The composition of the Sub-Committee on Technical Assistance also entered into the discussion, although there is evidently less demand for places on this Committee. In the case of the Sub-Committee on Information there was difficulty in getting enough members to serve.This matter is a perennial one at Colombo Plan meetings and no really satisfactory solution seems to be in sight. At the 13th meeting the Business Committee could only reaffirm principles on the composition of the main committees adopted in 1960.There was also a widespread feeling that the pattern of representation on Country Chapter Working Groups needed revising, having been unchanged for several years. The Business Committee drew up a modified allocation for these Groups for 1962, by which Canada will be a member of the Working Groups on India and Laos, and will be chairman of the Working Group on Malaya.

Drafting CommitteeThis Committee was ably chaired by the Leader of the Indian Official Delegation, Mr. N.C. Sen Gupta, who has some years of experience in attending Colombo Plan Meetings. Canada was not a member of the Drafting Committee in 1961, having stood down in favour of Australia, but may expect to be on it again in 1962.Sub-Committee on Technical Cooperation

Mr. George, Leader of the Canadian Delegation, was elected Chairman of this Sub-Committee and Mr. McGill acted as Canadian representative.One of the regular tasks of this Sub-Committee is to draft a chapter on technical cooperation for the Annual Report. A working party composed of members of the Canadian, Indian and Cambodian delegations was set up to do the initial drafting and in fact the Canadian member did the actual work.The Sub-Committee reviewed the Report of the Council for Technical Cooperation, on which there were only some minor comments about statistical presentation.A Report on Training Facilities at the Technician level in South and South-East Asia had been commissioned by the Council and carried out with a Ford Foundation grant by Mr. H.R. Mills. This Report, which was a good piece of work, contained a number of recommendations which were discussed in some detail and in general met with approval. Detailed comments will be found in the Sub-Committee’s report.

A proposal was made by the Philippines, Malaya and Thailand that there should be a survey of technical assistance needs in the region. The authors evidently had in mind (although they had not thought the matter out too clearly) a report something like that of Mr. Mills but enumerating the “needs” of each country for technical assistance. They were not to be deterred by arguments about the difficulty of establishing “needs” in this field, nor by the contention of several delegations, including the Canadian, that determination of needs was the responsibility of each country and not of any outside body.The compromise arrived at on this question was that the Sub-Committee recommended that each country in the area survey its needs for technical assistance; that the reports of individual member governments be circulated by the Colombo Plan Bureau; and that the 14th Meeting of the Consultative Committee might then consider whether a comprehensive picture of the needs of the region as a whole was desirable.Sub-Committee on Information

Nine countries, including Canada, comprised the Sub-Committee; observers from five other countries and from the Colombo Plan Bureau sat in on meetings as well. The Sub-Committee was chaired by the representative from the Philippines, Mr. Rolando A. Garcia. Mr. Head was the Canadian representative. The Sub-Committee commenced its work by reviewing two documents prepared for it by the Colombo Plan Information Officer. The first of these was a Report on Colombo Plan information activities in 1960-61, and the programme for 1961-62; the second document was a summary of action taken by member governments to celebrate the completion of 10 years of Colombo Plan cooperation.The first two meetings of the Sub-Committee were largely occupied by a criticism of the information activities of the Bureau introduced by the Malayan Delegation. The chief complaint seemed to be that Bureau information materials were not sent in sufficient quantities to the Federation of Malaya. The Bureau Information Officer, Mr. Malik, suggested that any problem could be attributed to the failure of the Federation to inform the Information Officer of the numbers and quantities of various materials prior to their actual circulation.The Sub-Committee devoted much attention to the language problems of the various countries. The Information Officer was required again and again to emphasize that his budget was not sufficient to provide as many language versions as he was now being requested to do by some Delegations. He felt obliged to bring the Director of the Colombo Plan Bureau to one of the meetings to underline this position. He also informed the Sub-Committee that those publications which were available in language versions, principally “The Colombo Plan Story,” had not been subscribed to fully and that a large number of copies could still be versioned if the request was made.In an attempt to shift the Information Office from the defensive the Canadian Delegation suggested that co-operation among member countries sharing common languages other than English could be fruitful. It was pointed out that Tamil is spoken in three of the countries in the area, that Malay is common to two countries, that French is used in three countries plus Canada, and that Chinese is known in several countries. The Sub-Committee report reflects this suggestion by recommending that materials prepared in one of these versions by one country could economically be made available to other countries.The Canadian Delegation was also successful in placing in the draft report of the Sub-Committee a reference to the necessity of a continued flow of information from member countries to the Colombo Plan Information Officer for distribution by him. Emphasis was given to the point that the Colombo Plan Information Officer did not himself initiate information materials but relied wholly upon those received from member governments. The Canadian Delegation was then successful in removing this reference from an ignominious spot in page 5 of the draft report and raising it to an integral portion of one of the early paragraphs and backing it up with the first recommendation of the Sub-Committee.The Sub-Committee noted, but did not feel strongly enough to recommend, that member Governments who had not already done so should designate separate liaison officers for contact with the Bureau for information work. This was a point made by the Malayan Delegation with great force and at great length but was not received enthusiastically by many of the Sub-Committee members. The Bureau information programme for the forthcoming year was approved by the Sub-Committee. Considerable reluctance was expressed by the Delegations of Canada, Britain, the United States and Malaya, however, with respect to the proposed 50 page booklet giving basic information about the region. The value of such a booklet and the anticipated number of orders were both questioned. Mr. Malik and the Director of the Bureau both supported the booklet, however, as did a majority of the Sub-Committee.

Part II

MINISTERIAL MEETING Minesterial Meeting

The Honourable David Walker, Minister of Public Works, represented Canada at the Ministerial Meeting.At the time the Ministerial Meeting took place the Malayans were very disturbed by proposed releases by the United States of some of their stockpile of natural rubber. Any consequent fall in world rubber prices would have very serious effects on the Malayan economy. The Prime Minister of Malaya therefore spoke out very emphatically in his opening address about the problems of countries which are dependent on one or two primary commodities, and this tended to direct a good deal of attention to the question of markets and prices for primary commodities during the rest of the meeting.

The Malayan Prime Minister, Tunku Abdul Rahman, urged that developed countries eliminate barriers to trade and abolish internal policies which discouraged the consumption of the products of primary producing nations. He suggested that Colombo Plan countries should take the lead in finding solutions to the problem of unstable prices for primary products, and he endorsed the idea of compensatory financing for primary producing countries when their export incomes fluctuate. The leader of the Malayan Delegation went even further in his address to the Conference, and said that the Malayans’ faith in the United States desire to help the underdeveloped countries had been weakened.The Australian Delegate, Sir Arthur Tange, Permanent Head of the External Affairs Department, made the most detailed reply to the Tunku’s remarks on this point. He referred to efforts made in other agencies to deal with stabilization of markets and prices for commodities. Other South East Asian countries, especially Indonesia and Ceylon, strongly supported the Malayan point of view. The United Kingdom Delegate, Lord Lansdowne, Parliamentary Under-Secretary of State, Foreign Office, spoke of dealing with this problem on a “commodity-by-commodity” basis. He also said that a high and stable level of world trade was the only real solution. The U.S. did not reply directly in the course of the meeting to the Malayan Prime Minister’s speech, but Mr. Bowles held a press conference on the subject later. The Canadian Delegate pointed out that commodity problems were being discussed in various other international forums, and in particular that Canada had worked with Malaya and other countries in GATT to reduce or remove barriers to trade.In the main discussion on the Annual Report of the Colombo Plan, which had been prepared in the preceding meeting of officials, most countries drew attention to their particular problems and their progress, or lack of it. The Asian members, while expressing appreciation for aid received in the past, also emphasized in almost every case their great need for continuing assistance. The New Zealand Delegate, Mr. Dean J. Eyre, Minister of Defence, referred to his country’s fears about the effect of the U.K. entry into the Common Market. The U.K. Delegate said his country believed its entry would mean a net expansion of trade and would benefit others as well as the U.K.The Indian Delegate, Mrs. Sinha, Deputy Minister of Finance, gave a fairly detailed description of the Indian development programme. She urged the acceptance of the figure of 1 per cent of national income as a target for aid from the developed countries.The Canadian Delegate stressed in his speech the value of private investment, and regretted that more attention had not been paid to it in the Annual Report. The text of Mr. Walker’s speech is attached as Appendix C.† Some other delegations also mentioned private investment. New Zealand spoke on similar lines to Canada, and a few of the less-developed countries, particularly Malaya, said that they encouraged private investment.Although practically every speaker professed to be encouraged by the degree of economic progress in South-East Asia over the past ten years which was recorded in the Annual Report, there were many references to the high rate of population growth and the effect it had on development plans. The fact that recent censuses in various countries of the area showed that the increase over the past ten years had probably been about 150 million, and that the rate is very much higher than anticipated at the beginning of the Colombo Plan, was obviously very much in everyone’s mind. There were a number of sober references to the need for greater efforts to speed up economic development in the face of this enormous growth of population.The United States Delegate, Mr. Chester Bowles, probably made the outstanding speech of the Conference. He did not discuss aid problems in detail, and ignored many of the particular points raised by other delegates. He mentioned the $30 billion extended by the U.S. over the last decade in economic assistance, and attempted to describe in general terms the basic objectives of U.S. aid policy in terms of world-wide development. He said the U.S. was not just trying to stop Communism from spreading, or to buy friends, but to encourage orderly political growth with wider freedom of choice for the people of under-developed countries. He argued that there was a rising tide of hope in the under-developed countries. He emphasized the need for long-term development plans, which in turn required long-term commitments by donors.In the discussion on technical assistance which followed the general debate on the Annual Report, most countries had little that was new to say, except to emphasize the importance of technical assistance in the whole Colombo Plan programme. There were many favourable references to the report on Technical Training Facilities in the Area which had been prepared for the Colombo Plan Bureau by Mr. H.R. Mills, and there appeared to be general agreement that this report would be useful in stimulating better use of the existing facilities for training in the region and the development of more facilities. The delegates from Thailand and the Philippines, who had argued in the course of the Officials Meeting for a survey of technical assistance needs in the region, repeated their views on this subject in the Ministerial Meeting. The Canadian representative, along with others, endorsed the recommendation of the Sub-Committee on Technical Assistance that surveys of technical assistance needs should be done individually by member countries, since only they were in a position to determine their own needs. This was the only point upon which there appeared to be any real difference of opinion on the subject of technical assistance. The statement of Canadian representative on technical assistance matters is attached as Appendix D.† The communiqué issued at the conclusion of the Ministerial Meeting is attached as Appendix E.† It is largely a brief version of the introductory chapters of the Annual Report. It will be noted that the 14th Meeting is to be held in Australia.

616. DEA/12881-40

High Commissioner in Ceylon to External Aid Office

LETTER NO. XA-0166 Colombo, December 18, 1961

SECRET.

Canada’s Colombo Plan Programme – Grant Aid or Credits

At the Colombo Plan Consultative Committee meetings in Kuala Lumpur last month, I was not surprised that there should have been strong pressure from the developing countries for Canada and other donor countries to do more than we are at the present doing; but I was impressed by the fact that most of the receiving countries would apparently prefer that we extend more credits for economic development even if it means that we might have to restrict the amount of our grant aid. This was definitely the view of the Indian, Pakistan, Ceylon, and Malayan delegations, and also (judging from what Mr. Tyler Woods told me) of the United States delegation as well. Previously I had heard this view expressed by the Ceylon Minister of Finance, Mr. Bandaranaike.

I know that the Ottawa-based members of the delegation will be reporting on the meeting as a whole and I should like to confine my comments to this single question of the need for doing more in the field of credits as part of our aid programme. As background for these comments I should like, however, to record briefly why the Colombo Plan countries, who have received more than ten billion dollars in external assistance during ten years, think that the rate of outside help must be increased if they are to do better than mark time in their march towards self-sustaining economic growth.

The most dramatic and important fact brought out in the ten year review incorporated in this year’s Annual Report was that the population explosion among member countries in South and South East Asia has given them a population in 1961 exceeding the estimates prepared ten years ago for 1970. Economic planners must now, in other words, take into account that they have 150 million more months to feed in the region than had been anticipated ten years ago.

The direct result of this unprecedented growth in population is that even those countries which have been doing quite well in terms of the rate of growth in their national product have virtually been standing still when their rate of growth is translated into per capita income, after making allowances for rising living costs. In real per capita terms, an annual rate of increase of one half to one per cent is considered normal, if not satisfactory, by the economic planners of the region.

Speaker after speaker dwelt at length upon (a) the widening gap between the developing and the developed, and (b) the increasingly unfavourable terms of trade for the countries of the region which are still mainly dependent upon the export of primary commodities, such as rubber, tin, tea, coconut, etc. During the Conference the price of rubber dropped by about three cents a pound due to the British and American sales from their stock piles of natural rubber. This small fluctuation in the price of one commodity will, I was told, if extended over one year, cancel out all the aid Malaya has received from all external sources under the Colombo Plan. Since returning to Ceylon, I find that a similar situation is in prospect, since the small drop in the prices of rubber, coconut, and tea may cost Ceylon (in foreign exchange and export duty losses) during the next year almost as much as it received from all external aid last year, about 123 million rupees ($25 million). These fluctuations in the world prices of the main exports of the region have, over the years, been the main unknown in all economic planning for the development of the region and have led to wasteful postponements or cancellations of economic development projects which, because of unexpected drops in commodity prices, one or another country of the region could no longer afford.

These pressures are not, however, enough to explain why so many developing countries of this region would deliberately choose to saddle themselves with repayment problems in the future if only they could get twice as much credit as we are at present making available to them as a free gift. It sounds irresponsible until one examines in detail the inner structure of their development planning. These countries – India especially – are in a gigantic poker game in which they must find more “chips” if they are to stay in the game with a chance of winning. Sufficient capital for development (as opposed to consumption) can be found in this region only from outside sources. The alternative is the imposition of totalitarian methods and the acceptance of mass starvation, as in the USSR between the wars and in mainland China today. Indian planners think that in from five to ten years they have a real possibility of their economy gathering sufficient momentum to be self-sustaining. If this is possible, then it makes more sense to invest heavily in credits for India for (say) the next seven years, so that they can reach “take-off,” instead of keeping them afloat at their present level or less on a lower level of grant aid, which we have no chance of getting back. We may not get back all our credits either, but if by doubling our investment in India we thought we might get back at least half of it in the course of time, the Canadian Treasury would be no worse off in the long run and we would have made a much more significant contribution to India’s development than we can ever do on the grant aid we can afford to give India.

That is the argument I was given by the Indian planners. It applies (more or less well) to other countries. For example, Ceylon has a relatively small burden of external debt but its economy is very much further from “take-off” than India’s. Nevertheless, if the long term burden on the Canadian tax payer is likely to be no greater (and may well be less), I suggest we should give careful consideration to the preference of the region (if my information is correct) for credits instead of grants, so long as the proportion is at least two to one. If the proportion were lower than that, the countries of the region would, of course, prefer to continue to receive grant aid from us, as at present.

It will be objected that the countries of the region are making a mistake in their economic calculations, and that we should save them from themselves by refusing their request. The damage (if damage it is) is already one, however, since Canada is the only major donor country which still retains most of its aid programme in the form of grants. Everyone else is now using credits for a high proportion of their aid operations. The United States made the shift in policy several years ago, and now clearly distinguishes between Export-Import Bank commercial credits and Development Loan Fund Aid credits. When we say that $10 billion has been “given” to the Colombo Plan region during the past ten years as “aid” we really mean that most of this amount has been lent as credit. Indeed, it is a constant annoyance to Canadian Delegations and Missions that usually no distinction is made between grants and credits, so that Canada stands much lower on the aid list that it should.

The Canadian programme is the exception, not the rule. For idealistic reasons we have clearly separated aid from trade and tried to keep in that way. This has avoided many administrative problems, (such as collecting payments on credits), and given us the respect as well as the gratitude of the countries of this region. But in their desperate search for investment capital during the next few years, they themselves would now prefer, I believe, that we abandon our policy in order to be able to make larger amounts available to them now on credit than we could possibly give as grants.

Let us compare ourselves with the Americans in Ceylon. Apart from its purely commercial Export-Import Bank credits, the United States is aiding Ceylon to the tune of about $9 million, annually, of which roughly one-third is in grants and two-thirds in credits, taking together both their PL 480 wheat flour operations and their A.I.D. programme of technical cooperation (USOM) and D.L.F. loans. A more detailed analysis based on recent USOM figures is attached to this letter, together with a comparative table of what the major donor countries are doing for Ceylon.

On a comparable basis, Canadian grant aid to Ceylon is $2 million annually, instead of $3.1 million, and we have no credits or loans. Other countries that are helping Ceylon now do so almost entirely through “tied” credits and a small amount of grant aid, chiefly for technical assistance purposes. This applies even to the United Kingdom, which has an economic stake in Ceylon tea alone of not less than £200 million. I cannot help asking myself why we are not using credits more and grant aid less, in conformity both with the wishes of the receiving country and the pattern of most other “donor” countries.

This, I know, is a minority opinion coming from the periphery, and I put it forward with some hesitation because I would not want the upshot of any aid policy revision to be that Canada would do less for the underdeveloped countries. My submission is that we should do more, but that it is time we began to adjust our aid policies to present conditions, in the light both of the needs of the countries we are helping and of our own interests. I know that this problem is already being examined in Ottawa and I wish only to add my experience to the debate.

At Kuala Lumpur the Canadian Delegation was preoccupied with a problem outside the scope of the Consultative Committee but directly related to the type of aid programme that we have. As a result of an agreement signed in October between the United States and India, India must buy from the United States (on credit) about two-thirds of her next year’s requirements of non-ferrous metals. Canada’s share of the Indian market in these, and certain other, commodities was thus threatened – the more so because we had already decided to cut down drastically the amount of our Colombo Plan grant aid for India to be spent on commodities which, though useful to India’s economic development could scarcely be said to leave a lasting monument of any kind to Canadian aid. I shall not go into this problem in detail here, but I think you would agree that it serves to illustrate the practical dilemmas we face because we do not provide ourselves with the same range of aid options as other major donor countries.

Another example is the Ceylon Government’s request for Canadian export credits for their top priority hydro-electric development on the Maskeliya Oya. This has never been a candidate for Canadian grant aid – it has been judged on its merits as a commercial proposition, with due regard to Ceylon’s “credit worthiness,” and if the project is approved by ECIC it will be a normal commercial credit, i.e., on terms that cannot compare with either the United States D.L.F. (now A.I.D.) loan terms or even with the terms of Germany’s “infrastructure” loans, which are now offered at between 3% and 4%. Japan, too, is combining Colombo Plan technical assistance offers with fairly low interest loans in cases where there can be said to be an “aid” element in a commercial proposition.

In other words, there is in fact a progressive blurring of the sharp line between aid and trade, and not merely for the sake of obtaining commercial advantages but because it is often objectively difficult to say whether a particular project – Maskeliya is an example – is trade or aid. The Germans have recognized this by creating a special category of loans on easy terms for “infrastructure” projects, and the United States have gone much further with their A.I.D. loans, though both the Germans and the Americans, of course, continue to grant purely commercial loans where appropriate.

Canada has at present no “middle” option, between a commercial export credit and a straight gift. The only way to keep “aid” considerations from getting mixed up with “commercial” considerations is to have two types of credits. As seen from Ceylon, we should have both, and they should be strictly separate. Only then, I suggest, will we be able to keep commercial considerations out of our aid programme and aid considerations out of our normal ECIC commercial credits, to the benefit of both. For “credit worthiness” is a sound criterion for commercial operations, but other considerations must apply where our aim is to help the economic development of another country.

Let me now try to pull together these threads of my argument. From my brief experience in the region of South and South East Asia and one Colombo Plan Consultative Committee Meeting, I think the Government should consider a fresh orientation of our aid programme, based mainly on aid credits along the following lines:

Grant aid should, on no account, be cut off abruptly or completely. We should complete existing projects, so as to retain the grant character of what we have begun on that basis. From now on, however, we should undertake major projects of economic development under aid credit arrangements and reserve grant aid for technical assistance, education, health, and other good works that will not pay the receiving country an economic dividend.

The machinery for administering aid credits should be built up as part of the External Aid Office operations and quite separate from the Export Credits Insurance Corporation, where commercial considerations and terms apply. If we must reduce our grant aid in order to be able to embark on aid credits, it must be quite clear that the aid credit arrangements are a real form of aid granted on generous terms of not less than 25 years repayment, with preferably a ten year period of grace and interest rates (if interest is charged) of less than 3 per cent.

Over a period of years, we should be prepared to extend credits in the amount of not less than twice the total amount of our present grant aid, less whatever sum would be needed to cover continuing grant aid projects as described above, and wheat. For capital equipment these aid credits would normally be “tied” to purchases in Canada, on the same basis as grant aid at present.

As regards the special problem of wheat, we should continue to ship roughly present quantities of wheat flour under our new aid programme but in future half the value of the shipments should be covered by ECIC credit and half by grant aid. Only half the local sale price would therefore be credited to counterpart funds in the receiving country.

A word of explanation is needed on this last suggestion regarding wheat. I do not know whether the situation is comparable in other countries but here in Ceylon we could, I believe, renegotiate our wheat flour “aid” on this basis and even increase the quantity which Ceylon would be willing to take. American PL 480 sales are, of course, a precedent; and so long as Canada buys much more from Ceylon than we export we could probably get them to take about $2 million worth of wheat flour annually at what would amount to half our commercial price. Half this amount in rupees would give us the same amount of counterpart funds as we have at present for local economic development projects approved by both Governments. Canada would be exporting more wheat to Ceylon and the cost to the Canadian tax payer would be less.

Assuming we need about $10 million to finance the grant aid half of these wheat shipments, and that our continuing grant aid for technical assistance and other projects were to be tapered off to a level of about $5 million a year, we should be able to extend aid credits up to about $70 million a year, since the retrenchment in grant aid would be about $35 million. Over a period of years, assuming that we get back at least half of the money we loan in the region, there will be less outflow of capital from Canada to South and South East Asia than if we continue grant aid at the present level. This would be the benefit for Canada in making the change of policy, together with the commercial obligations which, although they could not be stressed in an aid programme, are obvious from the lessons of our commodity difficulties with India this year.

All things considered, my personal view is therefore that we should re-shape our aid programme over the next few years, so that it will be largely a credit programme like the present Colombo Plan programmes of many other countries. This need not deprive us from taking credit for financing major development projects in the region. The United States put their name on hydro-electric developments, for example, that they have financed with aid credits rather than grant aid, and this is a generally accepted practice in this region.

As the pressures mount with the more widespread realization of the dimensions of the development problems of this region and other regions now making themselves heard, all donor Governments will no doubt be keeping under constant review the question of their ability to do even more than they have been doing for the underdeveloped. The target figure of 1% of GNP is probably beyond Canada’s capabilities in terms of a credit programme, but it is certainly beyond us on the basis of grant aid. I therefore assume that if we are to do more it must be on credit, and that we could only make significant aid credits available by some reduction in our grant aid programme.

JAMES GEORGE

[ENCLOSURE]

Memorandum

CONFIDENTIAL

United States Aid to Ceylon for an Average Year

(based on information recently supplied by the United States Operations Mission covering 1958-1961.)

% US $ Millions

I Wheat Flour (supplied on Rs account under PL 480) Retained for “U.S. uses” (i.e. running their Embassyand other similar official expenses in Ceylon) 20% 1.1Loans in Government and private sectors: 50% 2.75Grant Aid 30% 1.65 TOTAL $5.5 million

SYNOPSIS:Total Grant Aid for an average year 3.11Total Loans for an average year 5.95 Total Aid for an average year $9.06 millionm

N.B.: I was told by Mr. Tyler Woods that the U.S.-India PL 480 proportions are different: 15% “U.S. uses” and the remaining 85% is divided 50-50 between Grant Aid and Loans. However, this form of U.S. aid to India is, of course, only a small proportion of their total assistance, most of which is in the form of aid credits, i.e. loans on very easy terms.

EXTERNAL AID BY GOVERNMENTS TO CEYLON: 1951-60(In Millions of Rupees: $1 U.S. - Rs.4.80 approximately)(Excluding UN, IBRD, IMF and other international assistance)

Except for the German figures which we have added, the above figures are taken from a press communiqué of May 11, 1961 issued by the Economic Division of the Ministry of Defence and External Affairs. Of credits offered (and listed above) less than half have been spent to date. United States wheat flour seems to have been counted as “grant” though this is true of only 30% of it.

Section C - Malaya and Singapore

617. PCO

Memorandum from Secretary of State for External Affairs to Cabinet

CABINET DOCUMENT NO. 75-61 [Ottawa], February 20, 1961

A Proposal for the Establishment by the University of British Columbia of Courses in Accounting and Business Administration in the Malaya [Sic] and Kuala Lumpur Divisions of the University of Malaya

The University of British Columbia and the University of Malaya have made a proposal that the University of British Columbia, acting as the agent of the External Aid Office, establish and develop courses in accounting and business administration in the universities at Kuala Lumpur and Singapore. The governments of Malaya and Singapore have officially requested that Colombo Plan funds be made available for this purpose.This, in my judgement, is a very worthwhile proposal. In Malaya and in Singapore there is a great shortage of accountants and of business administrators, required not only for the economic activities of these states, but also for the public service. The U.B.C., with its well-established School of Business Administration, is in an excellent position to carry out this project successfully, and is indeed in a much better position than is the External Aid Office to undertake it. The U.B.C. is prepared to take on this important task, which it would initiate, and develop, and carry through to its conclusion, assuming responsibility for its administration. Since it seems likely that the educational part of Canada’s aid programmes in the future will increase substantially, the proposal of the U.B.C. might well establish a pattern of operations which it would be desirable and effective to follow in the future.The U.B.C. proposes to complete this project over the course of a five-year period from May of 1961 to September of 1965. I am inclined to recommend, however, that the progress achieved each year, and the plans for the succeeding year, be reviewed annually so that in effect the Government of Canada would be committed not to a five-year plan, which is not thought desirable, but to a programme which might well continue over a five-year period, subject always to careful annual review.The U.B.C. would undertake to provide certain services, and more specifically to:

establish and develop course, in consultation with the University of Malaya, Kuala Lumpur and Singapore Divisions, in accounting and business administration;

recruit the research and teaching staff;

provide administrative and co-ordinating staff to assist in the implementation of this project at the Kuala Lumpur and Singapore Divisions of the University of Malaya;

provide training facilities at the University of British Columbia and organize training programmes in Canada for trainees, who, upon completion of their training assignment will replace the teaching and research staff of the U.B.C. in the Kuala Lumpur and Singapore Divisions of the University of Malaya;

advise upon the necessary equipment, including library books, journals, business machines, and other supplies necessary to the implementation of the project. Initially, the U.B.C. would send to Kuala Lumpur and to Singapore a research team of three professors, to prepare a detailed work programme for the project, and to undertake at the same time the necessary research in business and in industry in Malaya and in Singapore with a view to adapting these research findings for classroom use. In addition, for the first year it is proposed to send out two associate professors to begin courses of instruction. In succeeding years there would be in Malaya and in Singapore six faculty members of the U.B.C., whose number would be reduced to four in 1964, and to two in 1965, leading to the conclusion of the project. At the same time, beginning in 1963, the U.B.C. staff engaged on this project would select appropriate trainees to come to Canada for training at the U.B.C. and elsewhere, who, on the completion of their successive training periods in Canada, would replace the Canadian professors giving instruction in Kuala Lumpur and in Singapore.

The U.B.C. has prepared a schedule of estimated costs to the Government of Canada to cover the project in Malaya and in Singapore. It is believed that this proposal could be made effective within a budget of $500,000, if it continues for the full five-year period, plus the additional costs of bringing trainees from Malaya and Singapore for instruction in Canada.Two types of payment would be involved. First, the U.B.C. expects to make no profit on this venture, but would naturally expect to be reimbursed for its out-of-pocket expenses in administering the undertaking. In the second place, the Government of Canada would pay the salaries of those sent out from the U.B.C. to serve as research experts and instructors. There would also be the costs of transportation for them and for their dependents, and the costs of the essential equipment.In order to make this proposal effective, the U.B.C. will have to send abroad to Malaya and to Singapore professors who are members of its faculty but who are not yet Canadian citizens. I understand that since business and accounting principles and practices in Malaya and in Singapore stem largely from those of the United Kingdom, it will be necessary that two of the U.B.C. staff of experts have a United Kingdom background. Further, in order to provide the precise specialty needed, it seems probable that one of the experts required abroad will be a member of the faculty of the U.B.C. who is still a citizen of the United States. In addition, certain equipment will be needed such as library books, reference material and business machines, to which reference has already been made, and most of this equipment would have to be purchased outside Canada. The value of these materials may amount to $21,500 if the project continues over the full five-year period. The essence of the proposal, therefore, is that the U.B.C. should, as the agent of the Government of Canada, undertake to initiate and bring to conclusion within five years (subject to annual review) a project of technical assistance involving the establishment and development of courses in accounting and business administration in the universities of Kuala Lumpur and of Singapore. The first question to be determined, therefore, is whether approval is to be given to this principle of contracting with an agency to carry out a Canadian programme of technical assistance. The second point to be determined is whether the conduct of this project is to be entrusted to the U.B.C. The third point is to determine whether the U.B.C. may be authorized to procure elsewhere than in Canada any of the $21,500 worth of materials essential to the project which cannot be secured in this country.Recommendations

In view of the importance of this project, which has received the most careful scrutiny by the authorities of the universities of British Columbia and of Malaya, in view of the fact that the completion of this project will correspond to a very real need in Malaya and in Singapore, and in view of the undoubted competence of the authorities and of the faculty of the University of British Columbia to bring this project to a successful conclusion, I recommend:

that approval be given to the principle of contracting with an agency to carry out a Canadian programme of technical assistance;

that the specific project of establishing and developing courses in accounting and business administration in the University of Malaya, Kuala Lumpur and Singapore Divisions, be entrusted to the University of British Columbia, and that the Government of Canada undertake to finance this project, subject to annual review, to the extent of $500,000 over the five-year period from May 1961 to September 1965;

that the University of British Columbia be authorized, insofar as some of the goods and services essential to the success of this project may not be had in Canada, to procure them elsewhere.

Fulton changed “the views they had expressed regarding the racial policy of the Union Government and its effects” to “the views they had expressed as to the conflict between the racial policies of the other Commonwealth nations and those of the Union Government.”

See The United Kingdom and the European Economic Community: Text of the Statement made by the Lord Privy Seal at the Meeting with Ministers of Member States of the European Economic Community at Paris on October 10, 1961. United Kingdom, Parliamentary Paper, Cmnd. 1565 (London: Her Majesty’s Stationery Office, 1961).

I. Please note: 1. That proposal to supply uranium should go to Cabinet.2. The SSEA agrees that Indians should be asked to make arrangement public. R. C[ampbell] 4/3II. To be placed on Cabinet agenda Tues. 7/3. R. C[ampbell]On March 7, 1961, Cabinet agreed to the sale of uranium concentrate, provided that it would be used only to fuel the Canada-India reactor and that the Indians would observe the same safeguards as had been agreed on for the sale of fuel rods in 1960. On March 10, 1961, Cabinet agreed that the second lot of fuel rods should be financed from the Colombo Plan allocation for India, provided that a satisfactory safeguards agreement was signed.

Mr. Ritchie: I very much prefer our thought about a C[olombo] Plan operation. I thoroughly agree with your para. 7. Should we inform Guy Smith of this approach? Or wait for developments? 2. Could we have a word with Prebisch on this? [Auteur inconnu/Author unknown]

Feasibility? From both countries’ point of view?Priorities?Projects essential to economic development?Whether projects submitted to other countries?Whether would be multilateral projects? [Auteur inconnu/Author unknown]